BMW E30 tyre sizes

My son's 1991 E30 has 195/65R14 tyres on the stock steel rims. These tyres are quite hard to come by, and he is thinking of using 175/70R14 instead. Apparently, BMW supplied cars with both these options. What this car originally came with is not known. I estimate that the difference in the overall diameter of the two tyres is 0.9%.

Three questions:

  1. Are the two tyre sizes interchangeable on the same rims? Will everything work correctly, like the speedo? How about the ride?
  2. Would this count as a modification that his insurers need to be notified about?
  3. How do we find out what the car was originally supplied with, and just as importantly will the insurance company be able to find out if there is ever a claim?
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