Fraudsters who lie about or exaggerate their whiplash injuries are to be targeted in a crackdown aimed at reducing the cost of insurance premiums.
The Government believes new independent medical panels could improve the diagnosis of genuine whiplash injuries while ending "easy paydays".
Figures show there has been a 60% rise in personal injury claims related to road accidents since 2006, despite vehicles becoming safer and a 20% reduction in the number of accidents.
The new plans aim to ensure that genuine claims can still go ahead, while dishonest ones would be robustly challenged.
Justice Secretary Chris Grayling, who is launching a consultation on the proposals, said: "For too long honest drivers have been bearing the price of a system that has been open to abuse - and it is time for that to change.
"We are proposing action to support effective whiplash diagnosis by medical experts and to simplify procedures which will help bring speculative or fraudulent claims before a judge - so genuine claims can still be settled, but fraudsters are left in no doubt there will be no more easy paydays."
The Government will consult on options to allow more whiplash cases to be challenged in the small claims court and to change the current position where it can be cheaper for insurance companies to accept questionable claims than to contest them.
It estimated that whiplash claims cost £2bn in 2010, or £90 per policy.
This is the latest stage of a series of significant civil justice reforms by the Government, designed to reduce legal costs and stop the growth of compensation culture in England and Wales.
The consultation complements law changes which will come into effect in April 2013.
They will include rebalancing no-win no-fee deals so losing defendants will no longer have to pay a success fee or legal insurance premium to the claimant's lawyer.
It will also include banning "referral fees" where companies can profit from selling on someone's personal injury claim, and stopping claims management companies from offering money or goods as an inducement to make a claim through them.
The insurance industry has committed to passing on savings to consumers made from the reforms to civil litigation costs, the Government said.