I was thinking the same...maybe he has some access to cheap wallpaper - if so can he share it. If not for him to be more realistic in his prices! If when you question him you have some examples of what you would like - ie make his job easier - then hopefully he will adjust it.
Your household policy will most likely have been written on the basis of New for Old cover ie, a chair that is damaged now gets replaced for what it costs now not for what it originally cost. If there is a loss adjuster acting for the insurance company, then I think you should discuss with him/her about what the costs for the wallpaper could be , as essentially you need to be put back in the position you were before the flood occurred.
Yes, what Clare said. I'm in the same position as you OP and have had to query a lot of what the loss adjuster initially offered. Eventually they offered more. You don't have to accept what they initially offer.
Push back with lots and lots of evidence. Get floor places to quote you for laminate. The more you phone them with reasonable arguments, the more they will budge. They bank on people accepting the offers.
When we had a flood and the carpet needed replaced the loss adjuster told us the price per sq meter we were allowed for the exact same type/quality of carpet at Carpet Wise (he told us the store to go to and knew all the prices of all the local stores).
Went in and arranged with Carpet Wise (think we got a slightly dearer one and paid the difference) and insurance company paid them direct.
I would contact him and tell him the price the paper is in B&Q and ask him to change his quote or tell you where he gets it cheaper.
surely they are meant to pay a "fitted" price which includes the cost of a decorator hanging paper of a floorer laying the floor?
When I had a burst pipe, I wentt o a carpet contractor who include removal, new underlay, new grippers, new thresholds, fitting, and the new carpet. I tool the insurers figures to him and she showed me the carpets I could have at that price (I had beter in some rooms and cheaper in one, inside the overall figure, and also paid him extra privately for a bit more of the bedroom carpet I liked for a non-damaged room outside the claim, he did a good rate as it was part of a large order)