They seem to pay out most of the time. I've just been reading through the Trustpilot reviews and it seems that the complainers haven't followed their procedures. Not taking "before" photos, not using a service that required a signature, and not submitting the claim soon enough seem to be the primary reasons. I'm not saying that the terms aren't fairly onerous, but you have to adhere to the policy rules taking out car insurance so it's not unreasonable to do the same for parcel insurance.
Last time I sent something, Interparcel wanted a hefty chunk on top for insurance. I booked direct through UPS instead, and the cost was quite a bit less including a declared value.