If they are alleging the chain hasn't failed; by their own reasoning, there is no risk in continuing to drive the car. They cannot play it both ways; it has either failed and requires replacement, or it is fine, and they must accept and repair any damage the chain does if/when it fails catastrophically. They cannot hold you to ransom with an essentially undriveable vehicle. A catastrophic failure will cost much more than a chain replacement. F**k them and their bullshit insurance speak.