The government is expected to ignite fierce opposition from claimant lawyers when it consults on the reform of the personal injury system.
Insurance Times understands that the Department for Constitutional Affairs (DCA) will suggest raising the small claims limit above its current level of £1,000.
While the move has the support of the insurance industry, it will be strongly opposed by claimant lawyers. They argue it would be unfair to claimants who will be deprived of legal representation.
The Association of Personal Injury Lawyers (Apil) said such a move would "seriously limit access to justice".
Insurers favour an increase in the small claims limit, as it would reduce legal costs. Each year the insurance industry spends £2bn on claimants' legal and other costs, according to the ABI.
Last year, a DCA select committee recommended the limit be raised from £1,000 to £2,500 to allow more claims to be fast tracked through the system.
Less controversially, the DCA is also expected to consult on proposals to achieve early admissions of liability by defendant insurers and remove the need for costly preparatory work by claimant lawyers where liability is not at issue. This would be supported by the insurance industry and claimant lawyers.
Justin Jacobs, head of liability, motor and pricing at the ABI said such a move would be a "step in the right direction" as it would cut costs "substantially".
A spokeswoman for Apil said: "We would fully support simple, immed-iate notification of claims to insurers, so that insurers can investigate quickly while recollections are fresh, witnesses can be easily found and documentation readily available.
"There should be no need for the claimant solicitor to investigate in depth provided an immediate decision on whether to deny liability is made by the insurer."
A DCA spokesman would not comment on the consultation paper until it was published. A publication date has yet to be set, although it is hoped it will be published by the end of February.