Whiplash reforms have been shelved by the Ministry of Justice, the Association of British Insurers has said.
In a letter seen by Post, James Dalton, director of general insurance at the ABI, said the proposed reforms to small claims have been delayed.
"Officials at the Ministry of Justice have told us that the Secretary of State (Elizabeth Truss) has decided she does not want to proceed with the reforms at the moment," the letter states.
"It is far from clear that the decision to delay these reforms, and the consequent savings for motorists, is unanimously agreed within government. On the contrary, it is our strong understanding that the decision not to proceed with the consultation has been taken by MoJ in isolation and that appetite to proceed with the reforms remains very strong within HM Treasury and among a number of influential MPs.
"We are in the process of picking up with officials at Number 10 to understand whether those at the very top of government understand the consequences of inaction on this issue."
However, Andrew Twambley, spokesman for Access to Jutice, has welcomed the decision to delay. "We are delighted: it's absolute common sense approach to these reforms," said Twambley.
"The previous plans would never have the desired effect as the ABI said they would. The insurers would have never paid back the cost savings to customers, it would have gotten lost somewhere else."
Twambley also said that there is now an opportunity for the ABI and Access to Justice to collaborate to end cold calling and fraud.
"There is now an opportunity for the ABI and Access to justice to rid the industry of cold calling and get rid of fraud and get rid of the evils that currently plague the industry.
"What the ABI said that the reforms would do was not based on facts and those alleged savings would never have happened."
A spokesman for the Ministry of Justice was not immediately available for comment. Dalton said that the decision means that motor fraud will persist and increase premiums.
"The Ministry of Justice seems to be rowing back from much needed reform to the civil justice system that will save motorists up to £50 a year on average," said Dalton.
"The UK has one of the most abused systems in Europe and the reforms would tackle the excesses of the compensation culture. Without action, claims management companies will continue to nuisance call and text honest motorists encouraging them to make fraudulent and exaggerated claims through claimant law firms.
"Every day of delay costs honest motorists across the UK nearly £3m. The plans are drawn up and ready to go, so there is no excuse for not pushing ahead.
"If the Ministry of Justice delivers on its promises, millions of honest customers will be better off. If they cave in to the vested interests of the ambulance chasers and cold callers, those businesses will be laughing all the way to the bank at the expense of honest motorists."
The reforms would have put a stop to the right to cash compensation for minor whiplash injuries.
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