The reforms have been introduced in an effort to cut fraudulent insurance claims, which are thought to cost the insurance industry billions of pounds a year.
A new online portal that allows drivers to lodge personal injury claims without involving lawyers is expected to reduce the cost of making such claims.
At the same time, all claims will now have to be supported by medical evidence - a move designed to tackle the high numbers of fake or exaggerated claims for injuries suffered in traffic collisions.
The Ministry of Justice said the changes would save insurers £1.2 billion a year, which insurers have pledged to pass on to motorists.
“For too long, the system for making whiplash claims has been open to abuse by individuals looking for an easy payday – with ordinary motorists paying the price,” said Lord Chancellor Robert Buckland.
“Our changes will put an end to this greedy opportunism and ultimately see savings put back into the pockets of the country’s drivers.”
Despite the number of reported crashes falling year on year since 2013 the number of personal injury claims has risen and is now 40 per cent higher than in 2006. In 2019/20 alone there were more than 550,000 claims lodged.
The new online portal will allow anyone to lodge a claim worth up to £5,000 and will operate on a new fixed sliding scale based on how long injury symptoms last.
The reforms also increase the small claims track limit for road traffic accident-related (RTA) personal injury claims from £1,000 to £5,000. This means the majority of all RTA related claims will now proceed through the cheaper small claims track where legal costs are not recoverable.
Steve Gooding, director of the RAC Foundation, said: “There are almost as many lurid headlines about whiplash claims as there are claims themselves.
“This new system should mean legitimate cases are easier and quicker to deal with, fraudulent claims are more likely to fail and all drivers benefit from decreases in their insurance premiums.”