Should health insurance companies pay for the lastest technology or the most cost affordable treatment?

A 34-year old woman lost her hands due to cancer. There have been developments in prosthetics, and there are now prosthetic hands available that have computerized chips inside them. The cost for these hands are $25,000 each, and therapy is needed to learn how to use them. Additionally, there are maintenance issues with them, and they will eventually need to be replaced. However, her health insurance coverage only covers standard, conventional prosthetics, such as hooks and pulleys, for hand amputees. When her doctor filed a claim for the computerized hands, her health insurance carried denied the claim, because there were other options available that were covered.

The state of Indiana Department of Insurance stepped in and said that the insurance company had to provide her with the computerized hands, which they did, rather than challenge it.

Was the insurance company exercising financial due diligence by rejecting the claim for the expensive computerized hands over the less expensive traditional hook and pulley prosthetic? Or should compassion overrule fiscal oversight? The money that pays claims comes from the premiums paid in by other group members, and not from insurance company profits.