MPs have demanded that car insurers end "sharp practices" which have pushed up the cost of motor cover.
A cross-party Transport Committee slammed insurers' practice of cashing in on accident victims by earning fat referral fees from personal injury lawyers and others.
Louise Ellman, the committee chair, said: "The insurance industry must abandon sharp practices that push up premiums such as passing drivers' personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms."
In a report published today, the committee blames the spiralling cost of motor insurance on "market dysfunction". In particular, it pinpoints the escalation of uncontested claims for whiplash injury.
"Insurers, solicitors and claims management companies have themselves driven up the cost by encouraging people caught up in road accidents they did not cause to claim for personal injury, car hire, and other legal costs," Ms Ellman said. "Drivers should not be railroaded by cold callers into launching legal action."
A separate report published today by insurer LV reveals that 60 per cent of GPs have reported a sharp rise in patients attempting to make fraudulent claims for car accident injuries in the last two years. Even more shockingly, 53 per cent of GPs say they have been contacted in the last year by claims companies asking to buy patient details while nine out of 10 say that have seen a patient who was completely making up an injury.
The MPs concluded that diagnosis of whiplash is often subjective and therefore very costly for insurers to challenge. Therefore the threshold for receiving compensation in whiplash cases should be raised.
The report also said the Government should establish a cross-departmental ministerial committee to look at reducing the cost of motor insurance, with "greater transparency" over referral fees.
"To expose the 'merry-go-round', the Government must oblige insurers to provide clear information to consumers about how and where they pay referral fees," said Ms Ellman.
Responding to the report, Nick Starling, director of general insurance at the Association of British Insurers, said: "Referral fees should be banned altogether and not made more transparent – and that ban should apply to all organisations receiving them, not just insurers."
Simon Douglas, director of AA Insurance, added: "We must kill the compensation culture that has sharply driven up car insurance premiums.
"The recommendations from the Transport Committee are a positive step towards doing that."