Motorists should brace themselves for a 5 per cent jump in their insurance premiums by the end of the year, one of the market’s leading providers said on Wednesday.

Admiral, which operates the Elephant.co.uk and confused.com online brands, said insurers across the market had pushed up premiums by about 2.5 per cent during the first half. It said the evidence suggested that a similar rise would take place over the next six months.

David Stevens, Admiral’s chief operating officer, said his company had resisted an increase in its premiums so far this year, but was likely to follow other players in the coming months. “We have left our premiums relatively flat; it is profitable for us and we have been happy to accelerate our volume growth,” he said.

Admiral had increased the number of vehicles it insures by 7.5 per cent over the six month period, partly because of competitive pricing. Mr Stevens said: “Our rating action will depend on how the market moves as a whole, but l would say that we will increase our rates over the rest of the year by a small amount.”

The prospect of a rates rise will disappoint millions of motorists, who are already facing a sharp increase in their fuel and other running costs.

However, insurance bosses argue that fierce competition has kept prices low in recent years. Maintaining premiums at current levels is not sustainable, they say.

Admiral has about 5.5 per cent of the UK’s car insurance market, having grown rapidly since it listed in 2004.

“We have grown very substantially without compromising our economics,” Mr Stevens said as Admiral reported a 16 per cent increase in pre-tax profits to £100.3 million for the six months to June 30.

Shares surged more than 10 per cent, up 89p at 914p as Admiral became the second-best performing stock in the FTSE 100 yesterday.

Times Recommends

• How to sell your home in a downturn
• How to boost your spending power
• Unemployment benefits explained