Increased litigation caused by the new Enterprise Bill will lead to increased premiums, the Association of British Insurers (ABI) has warned.
The Bill, revealed by the government earlier this week, is designed to increase competition.
However, the Confederation of British Industry (CBI) said it was concerned the Bill allowed consumer organisations to sue companies.
"The CBI is concerned that this will turn consumer groups into prosecutors," CBI deputy director general John Cridland said,
"Prosecution should be the job of the OFT [Office of Fair Trading], not private, often unaccountable, bodies."
An ABI spokesman said insurers believed that if someone has suffered a genuine loss due to another's negligence, they deserved compensation.
But he said anything that increased litigation would also increase premiums.
"There will be a price to pay," he said.
The spokesman said the ABI was currently studying the Bill.