Much travel is done as a package, for example containing airfare, accommodation, hire car, maybe a local tour. Components of that are at discount rates to help fill rooms or seats that would otherwise be empty and producing zero income. If the demand is such that there would be no empty spaces why would the provider feel compelled to offer special rates?
Yes, difficult and seemingly unfair for the stranded customer, and no doubt there is some profiteering going on, but businesses still have to return profits and cover themselves for the inevitable lean times.

"act of God" - no refunds.

I agree. Insurance can't cover that. Why should it?

Does that exclusion apply to an atheist's travel insurance too?