And what happens if they don’t have any assets and refuse to pay the instalments? Do insurers normally take them to court over it? Seems hardly worth it as the legal fees would outweigh any money recovered.
Yes they absolutely do take them to court. Just because someone hasn't got funds now doesn't stop that changing in the future.
Legal fees aren't that bad (well not for the one I worked for but assume all/most work the same), solicitor with a small team, all in house.
Most people wouldn't defend a DD case (or similar, we are talking some other offences here if the insurance is voided and payouts were made)
Its also about protecting their business. I knew of cases where PIs were used that cost 10X the value of the claim, just because the number of chargeable days had not been used and they would have had to pay no matter what.
Funny when investigated low value claims were often fraudulent. (One favourite was a Sky one that paid your Sky if you were redundant, people often started the claim fairly, but "forgot" to say when they got a new job)