The Department for Work and Pensions (DWP) will recommend whether Work Minister Nick Brown reforms the employers' liability (EL) system at the close of its EL review in Spring 2003.
The DWP announced the nature of its review late last night.
Trade bodies have welcomed it.
The review will survey the operation of the compulsory insurance system, taking into account any relevant aspect of the State benefits system.
It will assess the scale, nature and longevity of current difficulties with the system and make recommendations on whether reform is needed.
If reform is needed, the review will make recommendations on its objectives, principles and options for reform.
Brown said his department would continue to work closely with insurers, brokers and businesses to "ease the existing pressures" in the meantime.
The Engineering Employers' Federation (EEF) welcomed the announcement but urged the DWP to consider early measures to support firms facing large premium increases.
"In the short term there's much the government can and should do to relieve the massive pressure on premium inflation," EEF health and safety head Gary Booton said.
ABI general insurance head John Parker welcomed the scope of the review.
"We're delighted the government recognised our concerns that there are underlying issues that need to be considered in the review," he said.
Biba chief executive Mike Williams said he would continue to meet with government departments as the review was underway because it was vital all stakeholders participated in finding a solution.
"We'll see officials from the DTI on Monday and will be communicating with the Minister for Work throughout this review," he said.
