The government is promising to check the "growth of compensation culture" by reviewing health and safety laws.
The man leading the study, Lord Young, has told the BBC he wants advertisements for personal injury claims firms to be banned.
Lord Young, who served as a cabinet minister under Margaret Thatcher, said many rules were "absolute nonsense".
But unions have warned against attacks on rules that protect staff and lawyers say "compensation culture" is a "myth".
Lord Young, whose review is expected to report back over the summer, told the BBC health and safety was very important but had been made a "joke" because it had been extended into areas that "frankly are not dangerous".
Restaurants had banned toothpicks on safety grounds and contestants in a pancake race had been told to walk, not run, because of rain, he added.
The peer, who was trade and industry secretary in the 1980s, will investigate concerns over the "application and perception" of health and safety legislation.
He told the BBC a "compensation culture" had been allowed to grow up over the past 10-12 years, which he suggested the previous Labour government had allowed in an effort to "save the legal aid budget".
He highlighted referral agencies - which advertise for people who have recently been injured and ask them to contact them, without a fee - and said they had helped increase "the number of people being sued".
"What actually happens is they investigate your claim, decide you have a good one, they then auction it to the lawyer who will pay the most for it," he said.
"So you don't get the best lawyer, you get the person who pays the most, therefore probably scrimps the most to win."
Payouts would then have to include contingency fees agreed with lawyers, referral agencies' fees and "often" insurance companies as well, he said.
"The health service paid out £8bn in five years - only one third went to the claimants, and two thirds went to all those other parties. Now that is really something that should be stopped," Lord Young said.
"Money in the health service should be spent on health, not on these things."
But Muiris Lyons, president of the Association of Personal Injury Lawyers, told BBC Radio 4's World at One programme that their understanding of figures from the NHS Litigation Authority was they were "nothing like that".
He added: "The government's own statistics on compensation claims... showed that in nearly all cases there are less claims than there were 10 years ago."
He and Lord Young disagreed on whether that included claims that never made it to court.
Mr Lyons said his organisation was "very concerned about the myths that pervade the media and so on about health and safety culture" and welcomed a review that was "proper and sensible".
But he added: "People can't claim compensation unless they have been injured because someone else is at fault.
"Our organisation is all about trying to reduce the incidents of injuries and I'm sure there is common ground there [with the review]. But where people are needlessly injured, through others' fault, they should be able to obtain access to justice."
A spokeswoman for the Department of Health was unable to confirm or deny Lord Young's figures but figures from the NHS Litigation Authority's annual report show there was a "signficant increase" of claims in 2008-9, but the previous five years saw "a largely static intake of new claims".
Speaking last December, Prime Minister David Cameron said the UK had become "saturated" by health and safety laws.
In recent years children had been told to wear goggles to play conkers and trainee hairdressers had been banned from using scissors, he added.
But Labour said the comments were a "caricature" based on "myth and exaggeration".