What is the purpose of "recission" in health insurance policies?

Recission in health insurance policies serves the purpose of canceling or voiding a policy when there is evidence of fraudulent information provided by the policyholder during the application process. When an insurer discovers that significant misrepresentations or omissions were made, they may choose to rescind the policy, effectively treating it as if it never existed. This action protects the insurer from financial loss that could arise from covering individuals who would not have qualified for the policy based on their true health status or relevant circumstances.

This concept is crucial for maintaining the integrity of the insurance system, as it ensures that accurately disclosed information is a foundational element of the contract between the insurer and the insured. When policies are rescinded, it typically involves returning any premiums paid, but the coverage is terminated retroactively to the start date of the policy.