Jenée Tibshraeny has this excellent article on insurance claims declined by car insurers because the driver made mistakes: they took one drink too many, they were restricted drivers, but did not have a properly qualified person with them, and so on. I should make it clear that I am not in favour of drink-driving. I think that people should observe their licence conditions, but I do not think that these should be blanket reasons for declining insurance claims, although blatant, knowing cases, should probably remain excluded.
The fact is, most accidents on the road involve some breach of the law: going too fast, not paying enough attention, failure to give way to the right... you can continue to add to the list. But, at least for now, we pay them. Why? Because we assume that the driver still wishes to avoid the insured contingency - so these are accidental lapses - and financial consequences of an accidental lapse are exactly what the customer is interested in getting insured.
Read the whole article and ask yourself how much worse it would be if the insurance policies had been life insurance, with an unlawful acts exclusion. Link. Fortunately such policies are not common, but several are sold by major brands to thousands of consumers every year in New Zealand.