Singapore SMEs expect to face multiple business challenges in 2025, with over half expecting AI to significantly impact business productivity, finds QBE Singapore annual SME survey

• Two-thirds of survey respondents say increased costs and reduced profitability is a challenge, with over half seeing reduced customer spending and financial challenges.
• To meet these issues, most are rolling out a variety of measures, including the deployment of artificial intelligence (AI) to bolster business productivity.
• While AI is having a positive impact, risks loom, say one-third of respondents. Exacerbating these concerns, Singapore SMEs are less informed about cyber risks, with knowledge in this area declining over the past year.
• SMEs are spending less on cyber insurance despite a rise in the number of cyber events experienced by these businesses.

SINGAPORE, Feb. 17, 2025 /PRNewswire/ -- QBE Insurance today announced key findings from its annual QBE Singapore SME Survey. Conducted between December 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 readiness for insurance digitalisation.

Foremost among this year's findings is how today's top business challenges are being acutely felt by many more Singapore SMEs than before. This year, two-thirds (66%) of survey respondents find increased costs and reduced profitability their number one business challenge, versus just half last year. Likewise, 56% are concerned with growing sales and reduced customer spending today, compared to 40% 12 months ago. Regarding company finances in areas like managing cash flow and access to funding, 51% are experiencing difficulties, in comparison to 36% found in 2024's survey.

Accordingly, the economic outlook for the next 12 months is less positive than a year ago. Only 52% of respondents believe this year will be better than the past 12 months, versus 60% last year. Some 70% feel that increasing operating costs will impact the economy negatively, while 60% feel rising inflation and a GST increase will also impact the economy. SME executives are similarly downbeat about the performance of their respective businesses: in the 2024 survey, 62% of respondents believed sales during the ensuing year would be better, compared to 55% this year.

"While there is much concern over the state of the economy and their own prospects in the future, businesses aren't standing still," said Shun Quan Goh, Head, Underwriting, Retail & SME, QBE Singapore. "The proportion of respondents taking action to tackle today's conditions has increased. This is notably the case with cost control, diversification of customer base, and business streamlining — some 70%, 49%, and 40% of respondents having acted on these fronts to ensure business viability."

SMEs adopting AI in business productivity drive

Over half (52%) of respondents said AI has a significant impact on business productivity, up from 49% a year earlier. Of note, 55% of survey respondents don't believe AI will replace jobs in their respective companies.  

While SMEs are upbeat about the current and future trajectory of AI, they are also wary of the risks the technology poses. Some 34% said it presents a threat to business activity — up from 30% last year.

Concern for the top AI risks among SME professionals is significantly more widespread than in previous years. The threat of AI replacing jobs was cited by 68% of respondents, versus just 17% last year — around 25% of Singapore SMEs foresee jobs in customer service, finance and accounting to be fully replaced by AI within three years, while 22% expect roles in routine manual work and labour-intensive tasks to be fully replaced after six years. In addition, 66% of SME leaders have AI-related privacy concerns in contrast just 10% in 2024; and 51% are anxious about AI-linked security breaches, compared to 15% a year earlier.

While awareness of the pitfalls of AI is on the rise, knowledge of cyber risks is declining: just 40% of Singaporean SMEs believe they are fully informed of the risks, down from 47% a year earlier. This may be one reason behind the proportion of businesses experiencing a slight increase in cyber events, from 25% to 27% year-on-year.

SMEs are actively seeking solutions to meet cyber threats across a wide range of measures. However, these don't include insurance, where the proportion of businesses covered has dropped from 38% to 36%. Of the 68% of respondents who do not have any form of cyber insurance, 51% would consider purchasing it, while 15% would categorically not consider it. The top reasons behind this stance include cost; the fact that their business doesn't store data; and the perceived low impact of such events on their businesses.

"While local SMEs are aware of their knowledge gap on cyber risks, they are still not compelled to purchase insurance, on the basis of cost control. Though a worrying trend, given increased technology dependencies, we believe insurers like us can still add value to the SME community by providing tools that assist them with risk mitigation in the current cyber risk landscape," added Mr. Goh.

An omnichannel customer experience is still preferred

Despite cyber concerns, an omnichannel customer journey that fuses offline and online touchpoints remains the preferred purchasing option by Singapore SMEs. In line with last year's survey findings, some 65% prefer buying offline (2024: 66%), while 35% prefer online (2024: 34%). In the offline space, use of agents as the preferred channel is up (2025: 29%; 2024: 27%), while the use of broker (2025: 13%; 2024: 16%) and bank (2025: 10%; 2024: 14%) channels are both down. In the online area, online-direct is up (2025: 22%; 2024: 18%), yet the online-aggregator channel is down (2025: 13%; 2024: 16%).

Notably, reliance on agents and brokers across the end-to-end insurance buying journey has increased across all touch points, except when asking questions. As such, 73% of SMEs prefer an insurance package tailored to their unique needs, covering multiple business risks — while 27% want individual products that cover specific business risks.

"Businesses that are able to successfully upskill their current workforces with the abilities to operate and oversee AI will reap the many rewards the technology offers now and in the future. The proliferation of AI is not about replacing people with machines, but rather, about adapting our workforces to meet this new paradigm," said Ronak Shah, CEO of QBE Singapore. "That SMEs continue to embrace an omnichannel buying experience underscores how policyholders acknowledge that the future of conducting business is humans harnessing technology – transforming both insurance and customer experiences, and the risks as well as benefits associated with its usage."

Appendix: Singapore-Hong Kong SAR SME survey: Business outlook summary

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

About QBE Singapore

Present in Singapore for more than a century, QBE Insurance (Singapore) Pte Ltd, a general insurance and reinsurance company, is the Republic's oldest registered Australian company.

Established in 1891, QBE Singapore is a trusted provider of specialist expertise and professional insurance services. Our insurance specialists develop leading-edge products that are client-focused, delivering cover tailored to deal with everything from complex risks to more simple and straightforward insurance needs.

QBE Insurance (Singapore) Pte Ltd is part of the QBE Insurance Group which is listed on the Australian Securities Exchange and headquartered in Sydney. To learn more about QBE Singapore, please visit www.qbe.com/sg

SOURCE QBE Singapore