Medical defence organisations say the move could help tackle spiralling legal costs in NHS litigation cases, which they blame for driving up the cost of GP indemnity.
In many NHS claims, legal costs claimed by lawyers far exceed damages payouts to patients.
In 2008/9 the NHS paid out £312m in damages and £456m in lawyers' fees.
Sharmala Moodley, deputy head of claims at the Medical Defence Union, said: 'The reforms will address the excessive and very often disproportionate costs claimed under "no win no fee" agreements.'
Medical Protection Society director of claims and litigation Emma Hallinan said: 'MPS is particularly pleased to see that the government intends to end the recoverability of success fees and insurance premiums - arrangements which we believe have contributed to significant increases in legal costs and have seen lawyers receive more than patients in 72% of its claims.'