A. No claim shall be reduced or denied on the ground that the disease or physical condition for which claim is made preexisted the effective date of the policy coverage and was not disclosed by the insured, unless the insurer has evidence that such disease or physical condition had manifested itself prior to the effective date of coverage for the disease or physical condition, and unless information on such disease or physical condition was requested on the application for insurance coverage. No claim shall be reduced or denied on such grounds unless the manifestation of the disease is established by proof of medical diagnosis or treatment of such disease or physical condition prior to the effective date of coverage for the disease or physical condition.

B. An insurer may rescind a minimum basic benefit policy within the first three years after the policy inception only upon receipt of information concerning the insured's state of health, and a finding thereon that the insured failed to disclose or misrepresented material information contained on the application. Material information is that information concerning the insured's physical condition or past treatment which would, if disclosed, resulted in refusal to accept that insured or others treated for the same condition or in substantially the same condition as the insured. The burden of proof in cases in controversy before the Department shall be on the insurer.

C. An insurer may rescind a minimum basic benefit policy after three years only upon a showing of willful fraud by an insured as to that insured's physical condition or the physical condition of an insured's covered dependant.

D. Qualified members of groups or trusts holding minimum basic benefit policies shall not be subject to individual underwriting procedures or standards normally applied to individuals holding a minimum basic benefit policy.