Insurers will be banned from settling whiplash claims without the 'victim' undergoing a medical examination, under proposals published this month by MPs.
The move was welcomed by some insurers. Simon Douglas, of the AA, said: "It's high time that insurance companies are no longer regarded as a soft touch to obtain a few thousand pounds for an injury that doesn't justify such payment – or indeed, for no injury at all – and I hope that the courts come down heavily on such attempts at fraud."
However, other insurers warned that the ban would end up increasing the cost of cover. Martin Milliner, of LV, said: "It is completely out of touch with what behaviours are operating in the personal injury marketplace today.
"Such a suggestion would drive up costs and therefore premiums and give even more power to claimant lawyers in what is an already imbalanced process."
In a damning report, the Commons Transport Select Committee said motor insurance was a "highly dysfunctional market" in which firms' pursuit of profit had led to higher prices for consumers.
In some cases, the companies' practices had "inadvertently encouraged criminal activity", the committee said, citing "insurance firms' willingness to pay compensation for whiplash claims which they suspect are fraudulent".
Proposing the ban on whiplash payouts without medical evidence, the committee's chairwoman, the Liverpool RiversideMP Louise Ellman, said: "Further action is still required to tackle fraud while protecting genuine claimants."
The number of dishonest insurance claims topped 59,000 last year, according to the Association of British Insurers. But the ABI also warned that "removing an insurer's ability to settle a claim without a medical report will only serve to increase insurers' claims costs, and consequently premiums".
Direct Line said it supports the proposals for a medical assessment of a minor injury claim.