Insurance companies say they can't grant blanket coverage for all coronavirus losses, but startups c

• Congress is pressing insurance companies to cover the financial toll of the coronavirus on their business clients, but industry members say it would bankrupt them to backfill such sweeping losses under standard commercial policies.
• Vouch, a startup insuring other startups, shares that industry stance, but it's been helping clients choose coverage for specific liabilities that can a result from the outbreak, like cybersecurity insurance to bear the cost of data breaches when employees work from home. 
• Vouch CEO Sam Hodges says that the coronavirus has been an "eye-opening" experience for the generation of startup founders who haven't yet steered companies through a recession. 
• Visit Business Insider's homepage for more stories.

Most experienced startup founders buy commercial insurance as a standard part of establishing a business, but there are always "trigger events" like the coronavirus that spur latecomer startups and other companies to scramble for business insurance policies, according to Sam Hodges. 

Hodges is the founder and CEO of Vouch, a startup providing business insurance to other startups. Founded in 2016, the startup aims to disrupt the insurance industry by offering policies for a range of liabilities that it says go beyond the five areas of risk evaluated by more traditional insurance companies. 

Vouch currently offers 9 categories of coverage ranging from cybersecurity policies to business property insurance (which would cover the laptops, desks and chairs of an office). Its insurance is targeted toward the core risks that early-stage startups are likely to encounter, according to Hodges. The startup's mission to revolutionize startup insurance has helped it attract prominent backers including Ribbit Capital and SVB Financial Group, the parent organization of Silicon Valley Bank. 

Now, as the coronavirus outbreak brings devastation to significant swathes of the economy, Hodges says that Vouch's role is more important than ever. 

While insurance companies are telling customers that their standard policies don't cover the wide-ranging economic havoc wrought by the coronavirus outbreak, Hodges says that the virus has prompted his customers to begin thinking in more detail about the particular kinds of risks that their startups are running — and to purchase  insurance coverage for those specific liabilities. 

"This entire situation made people more aware of how risk and how enterprise risk impact their business," Hodges said. He called it an "eye-opening" experience for the generation of startup founders who have yet to steer a company through a recession. 

Hodges says that the experience has motivated startups to to look for vulnerable spots in their strategies, marketing, financing and operations. For example, as startups have shifted to remote work, they are growing more careful about their data security. Vouch's cybersecurity insurance has become more in-demand among customers as a result, Hodges said.

And given the number of companies that are laying off workers to cut costs, Hodges says that employee practice liability insurance has also grown more popular. 

"I think people are very aware of the fact that how they take care of the people in moments like this is really important,'' Hodges said. "So as part of that, frankly, having employment practice liability insurance is a really good idea."

Coronavirus coverage

As government measures to control the coronavirus pandemic keep workers home and many businesses closed, the insurance industry's reluctance to extend coverage for the resulting financial losses has become a point of contention between public officials and the industry.

A letter penned by 18 Congress members to different insurers last month asked insurance companies to define the coronavirus outbreak's financial wallop as a covered loss under their existing commercial property insurance policies.

"We urge you to work with your member companies and brokers to recognize financial loss due to COVID-19 as a part of policyholders' business interruption coverage," the letter said. 

The insurance industry has so far refused, arguing that the effects of the pandemic are so sweeping that the industry would go bankrupt. "You just can't underwrite risk like that, it's not affordable," one industry representative told the Washington Examiner.

Hodges agrees with the majority of insurance companies, telling Business Insider that it is "impossible" to insure broadly against all coronavirus losses because of the enormous scope of the damage that has resulted from it. 

So for now, he's counselling his startup customers to think about the massive changes that their companies could be going through in the coming months. They can then spot possible new areas of risk, and begin exploring their insurance options. 

Watch: Alarming videos from hospitals around the world show what doctors are facing as they treat coronavirus patients

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