The implementation of effective rehabilitation could save the UK between £1.6bn and £5.8bn per year, the ABI said.
Announcing its report into the benefits of return to work and vocational rehabilitation, the ABI said the figures were based on savings made in other countries, as there was "almost no UK data on current levels" of rehabilitation provision.
The report also found that private sector rehabilitation providers said they could respond relatively easily to a 25% to 50% increase in demand for rehabilitation after work related injuries or illnesses, with many able to cope with a doubling of demand. NHS staff were less confident of their ability to cope with increased demand.
But ABI head of liability Paul Fegan said those concerned about rehabilitation should not look to the insurance industry to provide all the answers.
He said insurers were happy to provide information on their claims experience, but that issues such as liability laws, the accreditation of rehabilitation providers, and the supply of rehabilitation also need to be looked at.