Proposals unveiled yesterday include independent medical assessments of whiplash claimants to ascertain which injuries are real.
In addition, most whiplash claims would be dealt with in the small claims court, making it cheaper for insurance companies to challenge potentially fraudulent cases without running up substantial legal costs.
Helen Grant, a junior justice minister, said that Britain “has become the whiplash capital of the world”.
“Between 2006 and 2012 claims for personal injury caused by road traffic accidents increased by 60 per cent. Over the same period the number of reported road traffic accidents fell by 20 per cent,” she added.
The Association of British Insurers says fraudulent whiplash claims cost the industry £2bn in 2010 – adding £90 a year to the cost of the average car insurance premium.
Consultation on the measures will end in the spring and the insurance industry has promised to pass on any cost savings it makes to consumers.
The government has already introduced measures to crack down on no-win-no-fee legal cases including, from April 2013, a ban on selling the personal details of people involved in accidents to third parties.