Hong Kong SMEs face rising business costs and rapidly evolving cyber risks, while AI is thought to significantly impact business productivity, finds QBE Hong Kong annual SME survey

Almost 60% of survey respondents say increased costs and reduced profitability is a challenge,with about half finding cash flow and access to funding a challenge.

To counter these issues,many continue to implement a wide range of measures,including the use of AI to support business productivity.

While AI is having a positive impact on Hong KongSMEs,risks loom,with the proportion of respondents concerned about AI-associated threats increasing.

Fortunately,awareness of cyber risks is on the rise,as is the proportion of Hong KongSMEs purchasing insurance as a means of protecting their businesses from these threats.

HONG KONG,Feb. 17,2025 -- QBE Insurance today announced the findings from this year's QBE Hong Kong SME Survey. Conducted between November 2024 and January 2025,600 decision-makers gave their views on a wide range of business risks and opportunities,including the impact of artificial intelligence and cyber risks,and their appetite for insurance digitalisation.

Notably,today's business challenges are being felt by many more Hong Kong SMEs than in the past. The percentage of businesses experiencing increased costs and lower profitability dramatically rose from 40% last year to almost 60% this year. Similarly,about half are challenged with both talent and labour shortages,as well as financial issues such as cash flow shortfalls and limited access to funding,compared to 39% and 34% respectively last year. The proportion of respondents experiencing such challenges rose across eight different categories year-on-year.

Echoing these findings,the economic outlook for the next 12 months is less positive than a year ago. Some 64% of respondents believe this year will be better economically than the past 12 months,versus 70% last year. Among several drivers of this viewpoint,74% of today's SMEs are experiencing deteriorating investor and customer confidence,up from just 63% last year. Survey respondents are equally as pessimistic about the performance of their respective companies: in the 2024 survey,70% of respondents believed sales during the ensuing year would be better,compared to 65% in this year's edition.

"Despite today's difficult conditions,businesses are rising to the challenge," observed Andex Fung,Head of SME Segment,Asia at QBE. "Over the past few years,Hong Kong SMEs have become more resilient to the myriad of challenges ahead of them,and continue to roll out measures designed to meet these. Three-quarters of Hong Kong SMEs have taken cost control measures,while 45% of respondents have streamlined their operations,and 42% have diversified their offerings. We believe these actions underscore the ability of local businesses to respond and adapt."

AI adopted in business productivity,despite looming cyber risks

Increasingly,Hong Kong SMEs are leveraging AI when it comes to business productivity. This year,57% of respondents said they were using the technology,up from 55% 12 months ago. Despite this,57% also don't believe AI will replace jobs in their respective companies any time soon.

While SMEs are upbeat about the current and future trajectory of AI,they are also wary of the future risks the technology poses. Some 47% said it presents a threat to business activity,up from 31% last year. The top AI risks include privacy issues and loss of jobs,cited by 69% of respondents; with 52% of SMEs having security concerns. Regarding the likelihood of AI replacing human roles,the majority of respondents only expect to see this in three areas — customer service,human resources,and sales and marketing — but not until after 2031.

Awareness of cyber risks overall is notably on the rise. Over half of SMEs say they are now fully informed of these,with 43% saying they are somewhat informed,up from 48% and 41% respectively. Despite this,the proportion of businesses experiencing a cyber event rose from 30% in 2024 to 33% this year. This increase might be the result of Hong Kong SMEs retracting on cyber protection activities. This year's survey saw a fall in the proportion of businesses using cyber security solutions and software (down from 62% to 60%),staff training (45% to 43%),and cyber resilience consultants (42% to 36%).

While businesses may be reducing investment in these areas,they are however spending in other areas. The percentage of Hong Kong SMEs hiring dedicated cyber security staff rose from 43% to 49% over the past year,while those purchasing cyber insurance also rose,from 39% to 43%. The top three drivers for purchasing coverage this year include paying for legal services,hiring security or forensics experts,and covering the costs associated data breaches.

Of the 62% of respondents who do not have any form of cyber insurance,63% would consider purchasing it,while 11% would categorically not consider it. Potential reasons include cost; the fact that their business doesn't store data; and the perceived low impact of such events on their businesses.

"It's heartening to see Hong Kong SMEs heighten both their knowledge as well as protection measures against cyber-attacks. The interdependency across sectors and businesses makes such risks unavoidable and the increased awareness of local SMEs demonstrates the role insurers like us can play in furthering their know-how and supporting their risk management in the current cyber risk landscape," added Mr. Fung.

Insurance digitalisation sees a shift back towards offline channels

When purchasing insurance,whether cyber or any other form of coverage,customers prefer an experience that combines in-person and digital touchpoints. Overall,68% of Hong Kong SMEs prefer offline channels(2024: 57%),versus 32% who prefer online(2024: 43%).

85% of SMEs prefer an insurance package tailored to their unique needs,covering multiple business risks,while 15% want individual products that cover specific business risks."Although SMEs' preference for online insurance channels has declined,our survey shows that a higher percentage of SMEs are using digital platforms for key touchpoints such as research,payment,inquiries,and claims," noted Lei Yu,CEO for North Asia.

A notable finding from this year's survey is a shift away from online towards offline channels,with a decline in preference for both online aggregators(2025: 16%; 2024: 22%)and direct online platforms(2025: 16%; 2024: 21%).While reliance on offline,in-person channels among brokers (2025: 30%; 2024: 22%)and banks(2025: 18% ; 2024: 14%)is up 8% and 4% respectively.

"Through a combination of various digital initiatives,combined with the high servicing levels of our intermediaries,we offer an omnichannel purchasing experience that leverages the best of both worlds — creating a highly personalised buying experience that enables customers to acquire holistic insurance solutions that meets their unique needs," said Ms. Yu.

Appendix: Hong Kong SAR-SingaporeSME survey: Business outlook summary

For results of a similar survey conducted with Singapore SMEs,please visit this link.

2025vs. 2024 results

Hong Kong SAR

Singapore

Top 5 business challenges

(2025: 2024)

1) Increasing costs / reduced profitability (59% : 40%)

2) Staff acquisition and retention / labour shortage (50% : 39%)

3) Finances (cash flow,funding,investments,forex etc.) (49% : 34%)

4) Economic uncertainty and financial resilience / economic downturn (47% : 30%)

5) Shortage of orders / business decline / closing down (46% : 33%)

1) Increasing costs / reduced profitability (66% : 50%)

2) Sales growth / reduced customer spending (56% : 40%)

3) Finances (cash flow,forex etc.) (51% : 36%)

4) Growing the business (50% : 36%)

5) Increasing competition (50% : 39%)

Top 5 business concerns

(2025: 2024)

1) Cost of running the business (46% : 35%)

2) Possible economic downturns in Hong Kong or other countries (41% : 27%)

3) Long-term profitability (39% : 30%)

4) Shifting to a sustainable business model (39% : 30%)

5) Consolidating services (39% : 33%)

1) Cost of running the business (62% : 39%)

2) Getting new customers / keeping customers (55% : 37%)

3) Long-term profitability (53% : 34%)

4) Cost of staff (48% : 33%)

5) Possible economic downturns in Singapore or other countries (48% : 29%)

Business outlook

(2025: 2024)

Economic confidence

• Better (64% : 70%)

• Unchanged (19% : 14%)

• Worse (17% : 16%)

Business sales outlook

• Increase (65% : 70%)

• Unchanged (21% : 20%)

• Decrease (14% : 10%)

Economic confidence

• Better (52% : 60%)

• Unchanged (26% : 22%)

• Worse (22% : 18%)

Business sales outlook

• Increase (55% : 62%)

• Unchanged (29% : 25%)

• Decrease (17% : 13%)

About QBE Hong Kong

QBE Hong Kong is part of QBE Insurance Group and has been serving Hong Kong for more than a century. Today,QBE Hong Kong operations include QBE Hongkong & Shanghai Insurance Limited,QBE General Insurance (Hong Kong) Limited,and QBE Mortgage Insurance (Asia) Limited. As a leading general insurer,QBE Hong Kong provides a comprehensive range of non-life insurance solutions for both business and personal customers. QBE Hong Kong operates through an extensive network of professional insurance agents and brokers.

To learn more about QBE Hong Kong,please visit www.qbe.com/hk