When they state they will pay either agreed value or market value they don't have the discretion as such, it simply means whichever option you agreed to when taking out the policy.
Not so much a problem with "enthusiasts" insurers such as famous or Shannons, but very careful about this and check the PDS for your policy, especially for your daily that you might have through one of the cheaper companies like Budget or Colesworth.
Some policies will have the payment being either market or agreed value, whichever is the lesser, so you maybe paying extra to receive less money.
Only insurance advice I have, after having great service from some companies and abysmal service from others, is check the PDS very carefully to make sure the policy suits your needs and don't shop on price alone, and also be very aware of the lazy tax.
I always get a few comparison quotes each year for all my cars to see how my insurers compare price wise to the market and see if I can get a better deal from them without the hassle of changing everything over.
Also look at using an insurance broker. I use a broker for my business insurances and got them to look at car insurance for me to see if they could do a better deal. For my situation and cars, I could get a slightly better deal myself, for someone else it maybe very different.