orally or in writing? - get them to start emailing you this stuff - its priceless.
I do zero deposit for rentals because I genuinely don't want the hassle of the scheme. You have to be very careful and totally straight about the deposit otherwise a court will just see that you are avoiding the law.
So you are paying a mandatory insurance policy as an alternative to the deposit? What was written in the AST about deposits? Why would you agree to purchase insurance that provided you with zero benefit? Have you seen the policy document or terms? Are they properly authorised to sell insurance? It is a regulated industry.
You Should read http://swarb.co.uk/ayannuga-v-swindells-ca-6-nov-2012/
but also google it as there is good advice for your ex.