Motorists could see around £40 cut from car insurance premiums a year after the Ministry of Justice launched a consultation on proposals to reduce the high number of whiplash claims today.
There has been a 50% increase in the number of whiplash claims over the last 10 years despite a fall in the number of road accidents, leading to concerns that the industry is encouraging minor, exaggerated and fraudulent claims to drive up premiums.
Today's consultation paper outlines plans to scrap compensation unless a medical report is provided as proof, or put a cap on the amount people can claim for minor whiplash injuries, with insurers pledging to pass on the savings to drivers - worth a total of £1bn.
Justice Secretary, Elizabeth Truss, said: "For too long some have exploited a rampant compensation culture and seen whiplash claims an easy payday, driving up costs for millions of law-abiding motorists.
"These reforms will crack down on minor, exaggerated and fraudulent claims. Insurers have promised to put the cash saved back in the pockets of the country's drivers."
There were over 800,000 small injury claims registered through the Ministry of Justice's small claims track last year, 750,000 of which are estimated to be whiplash injury claims, with one paid out every minute.
Economic Secretary Simon Kirby said: "One whiplash claim is paid out every 60 seconds and it is unacceptable that responsible motorists have to pick up the tab.
"We are tackling the incentives which have created this compensation culture so that all drivers can save money on their motor insurance policies."
The new measures include:
Introducing a transparent tariff system of compensation payments for claims with more significant injuries
Raising the limit for cases in the small claims court for all personal injury claims from £1,000 to £5,000
Banning offers to settle claims without medical evidence. All claims would need a report from a MedCo accredited medical expert before any pay out
Capping compensation which would see the average pay-out cut from £1,850 to a maximum amount of £425.
It is expected that these new proposals will decrease the amount of opportunist callers from claims companies asking members of the public about possible car accidents.
Consumer Intelligence chief executive, Ian Hughes, said; "The first thing drivers should notice is a reduction in nuisance calls from predatory claims companies.
"The need to produce medical evidence means that whiplash claims are no longer an easy and profitable for the "no win, no fee" market."