Plans to crack down on the "epidemic" of whiplash claims pushing up honest motorists' insurance costs have been unveiled by the Government.
The Ministry of Justice (MoJ) has launched a consultation on proposals to cut the high number of whiplash claims, which will allow insurers to lower their premiums. It said insurers have pledged to pass on savings to drivers - worth a total of £1 billion.
A motorist could see their car insurance cut by around £40 a year as a result of the clampdown, according to the MoJ.
Whiplash claims are 50% higher than they were a decade ago, with the epidemic being fuelled by a predatory claims industry that encourages minor, exaggerated and fraudulent claims, it said.
The consultation, which runs until January 6 2017, sets out plans to scrap the right to compensation or put a cap on the amount people can claim for minor whiplash injuries.
Capping compensation would see the average payout cut from £1,850 to a maximum amount of £425. Compensation would only be paid out if a medical report was provided as proof of injury.
Other 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 and banning offers to settle claims without medical evidence.
All claims would need a report from a MedCo accredited medical expert before any payout.
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."
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."
Someone shopping around for comprehensive annual cover can now expect to pay £585.84, according to the AA's recent British Insurance Premium Index.
The cost has surged by 16.3% over the past year, adding nearly £82 to a typical motor policy. The AA said whiplash claims and hikes to insurance premium tax had pushed up the cost of insurance.
Insurers, who have been pressing for further action on bogus or exaggerated whiplash claims, welcomed the proposals.
James Dalton, director of general insurance policy at the Association of British Insurers (ABI) said: "Introducing a range of measures, such as limiting the compensation payable for these injuries, will help create a more honest system that doesn't reward those who want to exploit it.
"If implemented, these reforms will ease some of the pressure recent increases in insurance premium tax and repair costs are already putting on premiums.
"We will need to study proposals carefully and look forward to participating in this consultation, and the debate about how we can ensure fair compensation for genuine claimants and a fairer deal for motorists."
Rob Townend, claims director at Aviva, said: "This is welcome news for consumers who are rightly fed up with nuisance calls, fraud such as crash for cash and the huge number of spurious whiplash claims they pay for in their premium.
"These proposals bring us a step closer to saying good riddance to the 'whip-cash' merry-go-round that is the bedrock of the UK's compensation culture."
Insurance firm LV= said 10% of its claims handlers were employed just to tackle fraudulent claims. Around 80% of personal injury claims it received related to whiplash.
Martin Milliner, general insurance claims director at LV= said: "The UK is known as the 'whiplash capital of the world' so it's vital that government implements these proposals without delay to ensure consumers can start getting a fairer deal as soon as possible."
Tom Jones, head of policy at Thompsons Solicitors, said: "If they go ahead, these Government reforms will hit injury victims, on the roads and in the workplace, while lining the pockets of car insurer CEOs and their shareholders."