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Insurance is a consideration but AUK's insurance is a last resort. If riders are covered for other reasons (CUK membership, 3rd party liability on home insurance, etc) then that insurance is used if a claim is required. AUK's insurance only kicks in if the rider doesn't have anything else.
AUK's insurance wouldn't cover riders on TCR/TABR since it is a race, but riders of those events should have their own insurance anyway (I think it's a requirement of TCR/TABR), so AUK's insurance should not be called upon at any time.
AUK's limitations on what things can be made into rides are mostly because they can't expect DIY organisers to judge whether each individual entrants insurance situation will cover the event. It's easier for them to say "no races, no sportives, etc" and then they know that the default AUK insurance (or the insurance from CUK membership) will cover a rider.
I think it's an important distinction because of Audax UK's insurance, they have to draw the line somewhere. If they allowed things that identify as races as DIY's, then why not in the calender?