Britain's biggest motor insurer says it is taking action to protect the public from the menace of uninsured drivers, announcing it will no longer penalise motorists involved in accidents with people driving without cover.

Direct Line said it was the first company to make this "revolutionary" change.

The move comes ahead of the imminent publication of a government-commissioned report into the problem, which is to recommend ways of protecting law-abiding motorists and cracking down on offenders.

It is estimated that one in 20 people drives without insurance, and accidents involving motorists without cover cost more than £500m a year. Motorists involved in collisions with uninsured drivers usually have to claim on their own policies, lose no-claims discounts and are liable for any policy excess - which can cost the individual several hundreds of pounds.

From Monday, any Direct Line comprehensive policyholders who are involved in accidents with an uninsured driver and are not at fault will keep their no-claims discounts and not have to pay an excess.

The company, which has more than three million motor policyholders, said this was a first for the insurance industry, and that it hoped other firms would follow suit.

It denied customers would have to pay more for this new benefit. Figures show across the industry there are about 300,000 accidents or claims involving uninsured drivers each year. The problem adds about 6%, or £30, to the cost of the average annual policy.

A report by Professor David Greenaway of Nottingham University, looking at ways of tackling the issue, was expected to be published last month. The Department for Transport said it may appear within days.