They might well be screwed but they'll likely have those government sponsored low interest loans made available to fix things up.
While some of the insurance industry is a scam, this is a prime example of how people try to blame the legitimate insurors for their own mistakes. There's a definite attitude in this country that insurance companies are the devil's spawn out to cheat the world and need to be punished at every opportunity. They fail to realize the very simple and basic fact that you point out in your post . . . insurance is a business, and like any business they're primary goal is to turn a profit.
All Jimmy the Hood has to do is drag the whole shebang out here to California. We have some wonderful judges that will sing and dance for very small tips. Hell, Some of 'em will even lap dance!
Your point that the house, in this case the insurer, always wins is the important part. The insurer has more assets to determine the "risk" of the policy than the policy holders do. So the insurer makes profit with its superior knowledge.
Now the State of Mississippi will determine the risk for the insurer. The insurer who pays re-insurers to take some of that risk will then be at the future mercy of premium raising re-insurers. The insurers will inturn transfer these higher re-insurance prices onto their customers. Guess who loses? The customers.
One caveat -- due to the time value of money, insurance companies are often highly successful even at a combined ratio of greater than 100. Given a billion dollars of insurance premiums, they can make money even if they pay out $1.01 billion dollars in claims, say. This certainly doesn't change the larger point.
This story (and a similar story on NPR) reported that some hurricane victims are being approached by adjusters wielding forms that require policyholders to acknowledge that their home sustained "flood" damage to obtain an initial payment. (The insurance companies, by the way, deny they are doing this.)
Now, I am in complete agreement that insurance companies should not have to pay for damages that are explicitly excluded in their policies -- as you say, that's how premiums are set.
But whether or not any particular damage is excluded depends on the specific facts of how the damage was caused, the exact wording of the policy, and the legal definitions an precedents of the words used in the policy. Policyholders should **not** be asked to concede legal points up front by an adjuster to speed up compensation for covered damage.
I don't know whether a storm surge constitutes a "flood" under the normal terms and legal precedents that cover policy exclusions. If it is clearly excluded, the companies shouldn't have to pay. If it isn't excluded, the companies do have to pay. And if it isn't exactly clear -- or if the policies were sold fraudulently -- policyholders have every right to file lawsuits if their claims are denied.
Alex R,
The policies are generally crystal clear:
"All water damage is exluded." Or something very similar - there's usually even a reference to "wind-driven" water being excluded specifically, which very spcifically coveres storm surges.
In other words, the insurance companies have their bases as covered as legally possible. We'll see if that does any good...
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