Midas: Vans put broker Brightside on growth road
Buying insurance used to involve trips down the High Street to brokers who would painstakingly call up their contacts in the industry to obtain what they maintained were the best quotes for customers.
Most people buy insurance by phone or online and comparison websites such as Moneysupermarket or Gocompare.com are often the first port of call.
The trend has been extremely beneficial for consumers, but it has brought huge problems for insurers as customers try to cut their premiums by lying about their age and circumstances.
What makes this type of fraud particularly worrying for insurers is that in the event of an accident, they are still liable for any third-party claims.
In a recent case, for example, a 19-year-old man with points on his driving licence received cheap online insurance by claiming to be a 60-year-old with an unblemished record. It was only when he drove into a bus, killing one person and injuring several others that the crime was uncovered, leaving tragedy and a £6m insurance bill in its wake.
When fraud is committed and insurers have to foot huge bills, premiums rise for everyone, particularly those that live in areas where a number of fraudulent policies have been taken out.
But insurance broker Brightside has devised a way of minimising the problem. Using technology called RedEye, the company can track whether customers change certain key facts about themselves when applying online for a policy.
Careful driving: Brightside specialises in insuring small business vans
Details are frequently checked if suspicions are raised and policies are rarely issued until driving licence information has been confirmed.
The process is painstaking, but it means Brightside has a far better record than many rivals so it is offered better rates by underwriters and can provide cheaper policies to customers.
The company was founded in 2005 by chief executive Paul Chase-Gardener, insurance director Arron Banks and commercial director John Gannon.
It joined the Alternative Investment Market four years ago, since when its market value has risen from £14m to £160m.
But despite the group's rapid growth, there is still considerable potential for expansion. Brightside started out insuring white vans, primarily those driven by the people who own them. Unlike the archetypal white van driver, these are small-business owners who treat their vehicles with care as they are essential to their livelihoods.
Policies vary widely in price - a van transporting glass will need a very different policy from one delivering fish, for example. The specifics make these policies more suited to the phone than the internet and they are the bedrock of Brightside's business, particularly as many of these customers then use the company to insure their car, their home, even their life.
Brightside has developed a niche in transport, insuring taxis, minibuses and motorbikes as well as vans. In the past year it has moved increasingly into internet cover and it believes that the RedEye technology gives it a real edge over the competition.
›› Midas verdict: Brightside shares were badly affected by the financial crisis, but they began to recover last summer. In the past few weeks the price has fallen back from 40p to 35.5p after Chase-Gardener admitted the life insurance arm was not growing as fast as he had hoped.
Current weakness offers a good buying opportunity. The life business should pick up once economic conditions improve, but it is anyway a small part of the group. Elsewhere, Brightside's white van business should also gather pace when the economy picks up while its car, motorbike and other internet offerings are expanding fast.
Chase-Gardener and his colleagues own more than 40% of the shares so they are clearly motivated to make the company do well. Buy.
Traded on: Aim Ticker: BRT Contact: 01484 600904 or brightsidegroup.co.uk
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Update: Call time on Velti after its fivefold increase
Velti is another beneficiary of the leaps and bounds made in technology over the past decade.
Founded in 2001 by two computer-savvy entrepreneurs, Alex Moukas and Chris Kaskavelis, the company is a world leader in mobile marketing, where companies advertise products and services through mobile phones.
This used to be rare, but it has increased even in the past 12 months and is likely to grow even more rapidly as use of smart phones increases and ordinary mobiles become more sophisticated.
Velti joined the Alternative Investment Market in 2006 and Midas recommended them in July 2009 when the shares were 150p. At the time, this was a slightly risky tip. The shares had already risen since the start of the year but the company was still small and was involved in a relatively unproven sector.
Investors who bought back then have done exceptionally well, however, as the stock is now 800p.
Last summer, Moukas and Kaskavelis, chief executive and chief operating officer respectively, said they planned to list on America's Nasdaq technology market.
The new shares finally started trading on January 27. US investors snapped them up and the London share price rose in parallel. Now Velti plans to cancel its Aim membership and shares will cease trading here some time in April.
Existing investors have two options. They can either transfer their shares to America or sell them in the market.
›› Midas verdict: Swapping British shares for US ones is a logistical headache. Velti shares may continue to do well but investors who bought at 150p have been richly rewarded and are advised to sell now and put the money into something more accessible.
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