Hong Kong SMEs pivot back to offline insurance channels

SMEs have scaled back cyber protection measures, with fewer investing in security solutions.

More Hong Kong small and medium enterprises (SMEs) are shifting back to offline insurance channels, with 68% preferring offline methods, up from 57% last year, whilst online preferences fell from 43% to 32%, according to QBE Insurance. 

SMEs have scaled back cyber protection measures, with fewer investing in security solutions (down from 62% to 60%), staff training (45% to 43%), and cyber resilience consultants (42% to 36%). 

Meanwhile more SMEs are hiring dedicated cyber security staff (up from 43% to 49%) and purchasing cyber insurance (39% to 43%). QBE Insurance’s latest Hong Kong SME Survey, conducted between November 2024 and January 2025, gathering insights from 600 decision-makers on business risks, opportunities, AI adoption, cyber risks, and insurance digitalization.

Amongst those without cyber insurance, 63% are considering purchasing it, whilst 11% ruled it out, citing cost and lack of perceived risk.

Additionally, 85% prefer coverage that addresses multiple business risks. 

Reliance on offline channels is growing, with more SMEs using brokers (30%, up from 22%) and banks (18%, up from 14%). 

Online aggregators and direct platforms saw declines, from 22% to 16% and 21% to 16%, respectively.

SMEs are also facing financial challenges, with a proportion of businesses experiencing increased costs and lower profitability rising from 40% last year to nearly 60% this year, a survey revealed.

Talent and labour shortages, along with financial issues like cash flow shortfalls and limited funding access, affected about half of respondents, compared to 39% and 34% last year.

The percentage of businesses facing difficulties increased across eight different categories year-on-year.

Business sentiment has weakened. Whilst 70% of respondents last year believed the economy would improve, that figure dropped to 64% this year. 

Investor and customer confidence declined, with 74% of SMEs citing deterioration, up from 63% last year. 

Optimism about company sales also fell, with only 65% expecting improvement compared to 70% in the previous survey.

Despite these conditions, SMEs are implementing cost control measures, with 75% cutting expenses, 45% streamlining operations, and 42% diversifying offerings. 

AI adoption in business is rising, with 57% of SMEs using the technology, up from 55% last year. However, 57% do not believe AI will replace jobs in their companies soon. 

Concerns about AI risks have grown, with 47% viewing it as a business threat, up from 31% last year. 

Key risks cited include privacy issues (69%) and security concerns (52%). Whilst job displacement is not an immediate concern, respondents expect AI to replace roles in customer service, human resources, and sales and marketing, but only after 2031.

Awareness of cyber risks has also increased, with over half of SMEs now fully informed, up from 48% last year.

However, the percentage of businesses experiencing cyber incidents rose from 30% to 33%.