In a case like above where they can easily check registration swaps at the roadside, all it takes is common sense.
IMO seizing cars should only occur when there is absolutely no doubt whatsoever that the car has no insurance.

After all, the police are allowed to make all manner of clerical errors, wrong names, dates of birth, addresses, dates, registrations etc etc, and all are simply overlooked
So why should they get so stuck up about an obvious clerical error elsewhere ?

Because far too many of them are ballbags on a mission to get the most tickets, regardless of how valid they are.