Ministers are pushing for people to take out insurance cover for catastrophic events as a replacement for legal aid, documents obtained by the Guardian reveal.

The current system allows the public to bring a case against an employer or for clinical negligence, for example, safe in the knowledge they will not be liable for costs.

Under the proposals it appears ministers would prefer the public to take out cover known as "before-the-event" (BTE) insurance.

Official papers show the civil servants in charge of legal aid and civil justice reforms told insurance companies last August: "As you know, the government is keen to encourage the take-up of BTE insurance."

Last week the justice minister Jonathan Djanogly admitted the government would promote BTE insurance as a way of funding legal expenses and predicted the cost of such cover would come down.

Labour says annual premiums could be £150, amounting to a tax on justice that would reap big profits for the insurance industry. An internal industry analysis shows insurers stand to gain £1 in profits for every £2 of premium payments.

Andrew Slaughter, the shadow justice minister, said: "We have known since the government first proposed major changes to civil litigation over a year ago that they would prevent deserving claimants – from asbestosis sufferers to those harmed by multinational corporations in developing countries – getting justice.

"Now we see this was done at the behest of the insurance industry who will not have to face valid claims and will clean up in a new mandatory and highly profitable legal expenses insurance market."

The insurance scheme has not publicly been admitted. Instead ministers have talked about implementing a reform known as "qualified one-way cost shifting", which would protect poorer claimants from paying costs if they lose, and also raising damage awards by 10% so defendants would not be left out of pocket because of legal expenses.

But the legal aid, sentencing and punishment of offenders bill, which is debated in the upper house on Wednesday, contains neither of the proposals. The Guardian has seen an email from the master of the rolls, the second most senior judge in the country, asking for the damages "uplift" to be put into the bill.

Labour and Lib Dem peers have sought to amend the bill to ensure the protections are made explicit.

The government was defeated in six key votes last week and ministers are loth to accept more rebel amendments.

Charities and victims' groups said the government was being disingenuous. Tony Whitston, of Greater Manchester Asbestos Victims Support Group, said a move towards an insurance-based system was "extremely worrying".

"For the people we represent – those workers who get a fatal cancer because they were working with asbestos – how will they know whether to buy insurance before they get cancer? It's very confusing. This affects a lot of people. The government acknowledge another 60,000 will die before 2035."

Many have been alarmed at the influence of the insurance industry on the government. Financial firms with insurance interests have given the Tories £5.4m in the last decade, £4.9m of that since David Cameron became leader in December 2005.

The prime minister invited chief executives from the insurance industry into Downing Street last month to discuss how to deal with the burgeoning costs of civil ligitation. Peter Walsh, chief executive of Action against Medical Accidents (AvMA), said: "Insurers have been given easy access to the Ministry of Justice. For us it's like getting blood out of a stone."

The Ministry of Justice said: "We are committed to reforming the 'no win no fee' system so that legal costs for reasonable compensation claims will be more proportionate and avoidable claims will be deterred from going to court. Before-the-event (BTE) legal expenses insurance can assist with the costs of legal cases for people who have it as part of other insurance policies."