The Transport Select Committee says claimants should provide much more proof that they have suffered a whiplash injury.
The MPs also want insurers to be banned from selling any customer information.
The government intends to ban them from receiving referral fees for this data, but only for personal injury claims.
Louise Ellman, chair of the Transport Committee, said: "Insurers, solicitors and claims management companies have themselves driven up the cost of motor premiums by encouraging people caught up in road accidents they did not cause to claim for personal injury, car hire, and other legal costs."
"The insurance industry must abandon sharp practices that push up premiums such as passing drivers' personal data to other parties or taking secretive referral fees from solicitors, garages and car hire firms," she added.
'Subjective and costly' The committee pointed out that there has been a 70% rise in motor insurance injury claims in the past six years, despite a 23% drop in the number of casualties actually caused by road accidents.
Louise Ellman said that whiplash, in turn, accounted for 70% of all these injury claims - amounting to roughly 554,000 whiplash claims in 2010-11.
"Whiplash [is] an injury where diagnosis is often subjective and therefore very costly for insurers to challenge," she said.
"The threshold for receiving compensation in whiplash cases should be raised and, if the number of such claims does not fall significantly, the government should bring forward primary legislation to require objective evidence - both of a whiplash injury and of it having a significant effect on the claimant's life - before compensation is paid," she added.
'Epidemic' The Association of British Insurers (ABI) agreed that the payment of referral fees should be banned, but to all organisations and not just to insurers.
The insurance company would have to prove that they don't have whiplash, and that's an extremely difficult thing to do” Nick Starling Association of British Insurers And it backed the call for action to restrict whiplash claims.
"It is absolutely critical that Britain's whiplash epidemic is tackled once and for all and the select committee's acknowledgment that the bar to receiving compensation for whiplash is too low is a step in the right direction," said Nick Starling of the ABI.
But he explained that currently it was very hard for insurers to resist claims for whiplash injuries.
"There is one whiplash claim every minute of every day in this country - the problem is that if someone presents themselves with a medical certificate saying they have got whiplash, the insurance company would have to prove that they don't have whiplash, and that's an extremely difficult thing to do."
'Dirty secret' In the past year the insurance industry and its fast rising motor premiums have come under increasing scrutiny.
In March 2011, the Transport Select Committee accused the insurance industry of encouraging claims through the payment and acceptance of referral fees In June, the former Justice Secretary, Jack Straw, described this system as a "dirty secret" and a "racket", in which insurers sell information about customers who have been involved in accidents to solicitors who then encouraged them to make claims In September, the Office of Fair Trading (OFT) started looking at why motor premiums have been rising fast That month the government agreed to change the law to ban referral fees in personal injury claims In October, the Parliamentary Justice Committee of MPs said the payment of such fees encouraged organisations to sell data without permission, and said the impending ban should apply to all referral fees paid by lawyers to third parties In December, the OFT launched a full investigation into car insurance costs, including the cost of accident repairs and replacement cars. Jack Straw said the entire system of motor insurance, which is compulsory for drivers, was acting against the public interest.
"Because the profits to be made are so high - in terms of legal costs, the intermediaries like credit hire companies who hire out replacement cars, the accident management companies which decide what kind of paint the accident repairers will required to use, and many others in this chain - you get probably £2bn out of the £9.5bn in premium income being siphoned off by this process," he said.
Legal changes The renewed emphasis by the Parliamentary transport committee on dealing with spurious whiplash claims was welcomed by the motoring organisation the AA.
"A claims culture has developed to the extent that it has become accepted that if another vehicle hits your car, you should make an injury claim," said Simon Douglas of AA Insurance.
Nick Starling from the Association of British Insurers and Dr Rosemary Leonard on whiplash "That's regardless of how serious the injury is, or even if no injury has actually been suffered," he added.
The AA acknowledged that the steep rise in premiums recorded in the past few years had levelled off in the past nine months.
Currently, the Lords are scrutinising the Legal Aid, Sentencing and Punishment of Offenders Bill, which has been amended to put in place the ban on referral fees relating to personal injury cases.
"Once the Bill is enacted, we call on the government to... prohibit insurers from receiving referral fees across the board rather than only in relation to legal action," said the Transport Committee's report.
"We recommend that the government send a clear message to the insurance industry that it expects the data protection legislation to be fully respected and we echo the recommendation of the Justice Committee that the stricter penalties for breaching the [Data Protection] Act, passed by Parliament in 2008, should be brought into force," the MPs added.