Consider the pre-existing condition ban, it sounds SO unfair too, but is it really? If I can buy medical insurance AFTER I discover an expensive to treat condition, or AFTER I feel sickly, then why EVER buy it before then? Why not cancel it immediately after care has been rendered and paid for? The same goes for "rescission"; if I say that I am healthy, or don't NOW smoke, then I get a MUCH better rate, so I likely will say so, hoping it to be true, or that it won't be challenged later. But who knows; I could have early to mid stage cancer yet may have not noticed any symptoms yet? Why don't I just wait until I am sick, or start feeling a bit off? Well, there is a compromise here, to be sure; one can postpone getting insurance until THEY "feel a bit sick" but have yet to seek treatment for that ailment (thus no proof of the "lie" is on file).
This is where MOST rescission comes in; you say all is well and buy the medical insurance. Very soon, you go to the doctor, using that new insurance benefit (why not you are paying for it?) and they find multiple problems, clogged arteries, perhaps some tumors that my be bad news and run a bunch of expensive tests, these expenses (of course) go to the insurance company for payment; the next thing, when the test results come back, they say you need heart bypass surgery and treatment for cancer that will cost well over half a million dollars. The insurance company now feels they were SCREWED, since you have been with them for less than a year, had no prior insurance and they think that you KNEW you were in bad shape, but lied, when you decided, after 20 years, to finally buy medical insurance; they decide to rescind your policy, they know it will be appealed, that you may even get on the news, giving them bad press and they will likely spend up to $200K in legal fees, but they decide that beats taking at least a $500K sure loss.
Link:
http://healthblog.ncpa.org/rescissions-much-ado-about-nothing/