Car insurance bills could come down by as much as £50 after the government unveiled plans to ban cash payouts for whiplash claims.

Whiplash costs the insurance industry around £2bn a year, or an average of £90 per policy, “which is out of all proportion to any genuine injury suffered,” the government said.

In measures announced in the autumn statement, George Osborne said the government will consult on ending the right to cash compensation for minor whiplash injuries.

“This will end the cycle in which responsible motorists pay higher premiums to cover false claims by others,” the Treasury said. “It will remove over £1bn from the cost of providing motor insurance and the government expects the insurance industry to pass an average saving of £40-£50 per motor insurance policy on to consumers.”



The average motor insurance premium in 2014 was £372, according to figures from the Association of British Insurers, so a £50 cut is equal to a 13% fall in cost.

But there are fears that the change will result in the small claims courts becoming clogged with whiplash cases instead.

It is also unclear how much of the benefit will be passed on to drivers. Last week, accountants EY predicted that motorists faced an inflation-busting 8% surge in the cost of insurance next year, with many insurance firms unprofitable on current rates.

Reductions in the cost of whiplash may be offset by rate rises, leaving many motorists little better off.

