At least, that’s the message many in the storm ravaged communities along the Gulf Coast are getting from their insurance companies as they attempt to rebuild their homes and their lives after last years devastating Hurricane Katrina reduced their hopes and dreams to so much clutter.

This AP article, which is appearing in many newspapers across the nation today, shows how thousands of storm victims are being systematically screwed out of money they were led to believe would be paid out in case of damage to their homes. If ever there were a reason for government regulation of an industry, the insurance giants are giving us one. Unfortunately, there actually is quite a bit of regulation regarding insurance, but most of it favors the insurers instead of the insured.

The owners of the sagging, flood-stained home aren’t in. Above the front door, a banner explains their absence, and the lack of progress: “Allstate paid $10,113.34 on this house for storm damage.”

“I want people to drive by my home and decide for themselves: Could I repair this for $10,000?” asks Eric Moskau, the home’s exiled owner who had over $1.2 million in coverage on his 3,000-square-foot home.

Did you catch that? He had insurance in excess of $1.2 million. Clearly, any sane homeowner would think that they had taken adequate precaution against home damage. Apparently though, that isn’t the case.

The biggest slap in the face though isn’t just how these folks are being left high and dry now that the waters have receded, but in how they really had no choice but to buy into a system that works hard to avoid any obligations it has to its customers.

Insurance is mandated by law or lenders, or sometimes both. Insurance is something you don’t really have an option to buy or not buy, unless you pay for your home or car outright and in cash. You want a loan for a house, get insurance. You want to drive a car, get insurance. In theory, when mishaps occur, or worse, the insurance is there to help you pick up the pieces. You know…like a good neighbor and all that.

Not so, it seems.

Insurance modeling firm ISO estimates Louisiana had $24.3 billion in insured losses, but the state department of insurance says only $12.5 billion had been paid out as of the end of April.

And while insurance companies play semantic games when writing their policies or paying out on policies, politicians are finding ways to blame homeowners for not being prepared, saying in part that people weren’t taking advantage of flood insurance offered by the government. But this is just not true.

According to the article, in New Orleans, 2 out of 3 homes carried federal flood insurance up to the maximum amount of $250,000. But when the fed policy was paid out, often the money was paid to the bank and applied to the mortgage, a practice that is illegal except in cases where rebuilding efforts have been prohibited. By law, banks have to put that money into an escrow account to be used for repairs.

Of course, we all know that the insurance and banking/lending companies have plenty of money to burn on political contributions. It seems their little insurance policies (paid for politicians) work a whole lot better than the ones they offer their customers.

Oh, and for those who want to defend the insurance companies with claims of how they have such a tough time with all the pay-outs they do make, keep this in mind. In 2005, the insurance industry cleared $43 Billion in profits, despite the damage caused by the hurricane season. That’s up 11.7% over 2004 and is a 15 year high, according to the Insurance Information Institute.

The insurance industry is a government mandated and protected racket, not much better than the organized ‘protection’ racket. Shouldn’t we be demanding a RICO investigation on all these companies? I’ve written about this before, but the evidence makes me even more sure that something needs to change.

As we come in to the new hurricane storm season, homeowners in vulnerable areas should beware…should another Katrina hit your home area, pack fast and find a new community. You’ll never recoup your losses if the big one hits.

(cross posted at Bring It On!)