I have now had a reply from the insurers, which seems very woolly in insurance terms, where things generally seem to be so tightly specified.
It does indeed seem that the insurers can decide to invoke the replacement clause at their will, with no specific criteria, and thus having over-collected premiums over the years. They mention the idea of betterment as someone talked about earlier.
They say that as long as the insured value is broadly similar to the market value, they will pay out no problem, but if there is a discrepancy, they may insist on a replacement. Surely this makes the idea that this policy is based on an agreed sum somewhat meaningless? They would replace with "an equivalent boat" though they do not specify how that would be determined, and neither does the policy.
Contrary to what they told me earlier, they are now saying that the value should be reviewed and amended annually, to avoid this situation happening, but that would be ridiculous if they were insisting on a surveyor's valuation each year, as this would far outweigh the policy saving. I will write back to them on this.
The letter ends with the statement that they will always try to ensure a fair settlement to any claim. Again a rather woolly statement that hardly fills with confidence.