If the person has submitted a formal 'declaration of voluntary surrender' to the DVLA, then they should inform the insurer, so that the information held on their files is kept up to date.
It's likely that the insurer will then require a new policy to be taken out, with the actual driver of the vehicle named as the policy holder. Otherwise a position similar to 'fronting' (where someone illegally claims to be a main driver in order to get discounted insurance for someone else to drive a vehicle) will have been reached.
The golden rule with any type of insurance is that if one is in any doubt as to whether a material fact should be disclosed, then disclose it anyway!