The insurance industry has promised to pass on savings to customers from a cut in personal injury legal fees, Downing Street said.
At a summit with leading insurers, the Prime Minister criticised the "compensation culture" and pledged to reduce the current £1,200 fee for lawyers on small personal injury claims.
The talks come amid growing concern about the 1,500 whiplash claims a day for even the most minor accidents, adding £90 a year to the average insurance bill. The UK has been labelled the "whiplash capital of Europe" .
The Government and the insurance industry are to work together to develop ways of reducing whiplash claims and the £2bn-a-year costs of compensation.
Number 10 said that options included requiring better medical evidence and introducing a speed threshold for claims.
Last month, a committee of MPs said the spiralling cost of car insurance was due to "sharp practice and poor management".
Insurance bosses committed to ensuring the savings were passed on to the public and also promised to challenge more health and safety claims rather than just paying out.
In an attempt to help small and medium-sized firms, the industry also indicated it would provide guidance stipulating exactly what employers do and do not need to do to comply with health and safety laws.
Concerns have been raised by businesses that they are forced to go far beyond legal minimums to secure insurance cover.
Mr Cameron said: "I am determined to tackle this damaging compensation culture which has been pushing up premiums.
"I want to stop trivial claims, free up businesses from the stranglehold of health and safety red tape and look at ways we can bring costs down.
"The insurance industry plays such an important part in all our lives - it is there to help when we are at our most vulnerable and at greatest need. But I want to ensure that we all do what we can to help people through this difficult time."
Otto Thoresen, director-general of the Association of British Insurers, who attended the summit, said "urgent action" was needed and the talks had been "very positive".
"We are encouraged that the Government recognises the need to tackle the factors that are driving up the cost of motor insurance, such as the reform of our dysfunctional compensation system," he said.
"We will be working with the Government to ensure that we make real progress as quickly as possible in tackling the UK's whiplash epidemic, and reducing legal costs."
But the Law Society, which represents more than 125,000 solicitors in England and Wales, accused the Government of failing to engage with it on the issue.
Chief executive Desmond Hudson said: "We wrote to the Prime Minister over a month ago, but it is disappointing that our offer to work with him and his Government in addressing public concerns over whiplash claims has been ignored.
"There are many options to address, from Government, Opposition, and others, which need proper consideration.
"Government should not be limiting itself to tea and cakes with one partisan set of stakeholders - the insurers."
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