Car insurance premiums could be cut by 10 per cent as the government cracks down at last on what it has called the “fraud and claims culture in motor insurance”.

In this week’s spending review the government said claims for whiplash injuries were costing the country an incredible £2billion a year, an average of £90 per motor policy, which was “out of all proportion to any genuine injury suffered” .

The right to cash compensation for minor whiplash injuries will be ended, and legal costs will be slashed by transferring all sub-£5000 claims to the small claims court. “This will end the cycle in which responsible motorists pay higher premiums to cover false claims by others,” the government said. "It will remove over £1 billion from the cost of providing motor insurance and the government expects the insurance industry to pass an average saving of £40 to £50 per motor insurance policy on to consumers.”

The biggest general insurer Aviva has been calling for similar measures for several years, in its Road to Reform campaign. It said: "These measures will directly address motor fraud like crash for cash, reduce the volume of nuisance calls, remove costly lawyers from the process - for every £1 we pay in compensation we pay another 80p to lawyers - and save motorists more than 10per cent on their premium.”

Aviva detected over 14,000 fraudulent claims worth £95m in 2014, with motor injury fraud accounting for 60per cent of them. Aviva currently has more than 15,000 suspicious claims under investigation - 6000 of these are motor injury claims linked to known fraud rings. One whiplash claim in every nine is suspect, the insurer says.

It went on: “When the government implements these changes, Aviva pledges to pass 100per cent of the savings – around £40 - £50 on the premium - to our customers.”

Huw Evans, director general of the Association of British Insurers, said: “This is a significant breakthrough in tackling the compensation culture and is good news for motorists.”

Mr Evans added: “Previous Government reforms have already led to insurers passing on over £1 billion in savings to motorists through lower premiums, and in a highly competitive motor insurance market, insurers will continue to pass on savings to customers”.

Motor scams were the most common insurance fraud last year and of highest value , with 67,000 cases, up 12 per cent on 2013, valued at £835 million, up three per cent.

Kevin Pratt, insurance expert at MoneySuperMarket, said: “We have seen premium prices rocket over the last few years, so any savings to motorists are a much-needed relief. However, as with many of the government’s announcements, we will need to see the flesh on the bones of exactly how this process will be put into place – we hope insurers will hear the warning loud and clear and pass savings on to motorists as soon as possible.”

He added: “Whilst the government’s plan to cut the cost of insurance premiums is positive news, it’s worth remembering that the average driver can save up to £212 on a car insurance policy by shopping around for a new deal at renewal.”

Simon McCulloch, director of insurance at comparethemarket.com, said: “News that the whiplash cash cow, seemingly abused for too long by fraudsters, is to be tackled head on can only be good for honest motorists. Having taken with one hand only last month with the Insurance Premium Tax hike, the chancellor is aiming to give back with the other.”

At the start of this month, Insurance Premium Tax rose from six per cent to 9.5per cent. According to the AA’s British Insurance Premium Index, that added an extra £17.50 to the average quoted premium.

Mr McCulloch added: “Those who automatically renew their car insurance can be particularly badly hit by annual premium inflation, with comparethemarket data suggesting customers could currently be paying on average almost £100 extra per policy than those who switch, so smart motorists will be shopping around regardless of this announcement.”