It is correct.
If a car has a valid insurance policy, if is in an accident, the insurance company is liable for 3rd party damage. So if you don't cancel, they have to pay. A consequence of a fairly recent law change.
Not every company is so tight as to charge you for a cancellation, and I suspect this is more common at the lower end of the market. NFU didn't charge me when I sold the Landrover. And actually gave me money back.
Trawl around the legal area of the Pistonheads forum for posts confirming this.
