Half of all whiplash claims are faked
The figure could even be as high as 60 per cent, as whiplash injuries are difficult to diagnose and the symptoms too easy to fake.
With insurance claims for such injuries worth around £2,500 a time, and with additional fees being earned by lawyers and claims management firms, insurance companies have argued they are being exploited by a "claims manufacturing industry" that encourages drivers to make false claims.
If the estimations are correct, fraudulent claims make up half of the 550,000 whiplash cases paid out on each year, and cost the industry £1 billion annually.
It is often easier for insurance companies to settle cases rather than fight those that are suspected to be fraudulent, leading to a huge increase in the number of claims in the last five years.
This has not been witnessed in other European nations, where legal fees relating to whiplash cases are limited.
The situation has also seen the emergence of the so called 'crash for cash' scam, in which fraudsters stage accidents with unsuspecting motorists before submitting false claims for injury and vehicle damage.
Insurers have calculated that the rise in claims has added around £90 to the premium of an average policy.
Giving testimony to the Commons transport select committee, David Powell, of the Lloyd's insurance market association, said: "It's so easy to fake, it's so easy to exaggerate. There is a claims manufacturing industry which has developed over the last ten to 15 years. It has gone into overdrive.
"If you have a more stringent test, you will get more of the fraudulent claims challenged and more fraudsters put off."