The NHS spends nearly £700 on clinical negligence cover for every live birth in England, a report says.
The review by the National Audit Office said last year this cost nearly £500m - almost a fifth of all spending on maternity.
Public Accounts Committee chairwoman Margaret Hodge said the figure was "absolutely scandalous".
The Department of Health said the NHS is one of the safest places in the world to have a baby.
Having a baby is the most common reason for admission to hospital in England.
The number of births has increased by almost a quarter in the last decade, reaching nearly 700,000 live births.
The public spending watchdog said maternity services were generally good for women and babies, but there was still a lot of scope for improvement.
Its report highlighted "wide unexplained variations" between trusts in rates of complications such as readmissions, injuries and infections.
Laura Blackwell, director of health value for money studies at the National Audit Office, told the BBC the number of maternity claims had risen significantly in recent years.
Speaking to BBC Radio 4's Today programme, she said: "There has been an increase in claims and we don't cover exactly why. It is the same across the NHS.
"I think it's a complicated picture... further complicated by the fact it takes an average of four years for a claim to be settled... so it's quite hard to draw conclusions about the current state of care."
The NAO also pointed to a shortage of midwives and consultants on labour wards. The report concluded that a further 2,300 midwives are required, though their distribution across England varies substantially.
And although it said the level of consultant presence has improved, more than half of units are not meeting the standard recommended by the Royal College of Obstetricians and Gynaecologists.
The report noted that between April and September last year more than a quarter of maternity units were closed to admissions for at least half a day because demand outstripped capacity.
Clinical negligence claims for maternity have risen by 80% in the last five years. The cost of cover last year was £482m, and the average payment per claim was £277,000.
Figures from the NHS Litigation Authority released last year showed the health service in England paid out more than £3bn in compensation claims linked to maternity care between 2000 and 2010.
Ms Hodge said: "I find it absolutely scandalous that one fifth of all funding for maternity services, equivalent to around £700 per birth, is spent on clinical negligence cover."
She said the NAO report had shown an urgent need to improve maternity services.
"The department needs to buck up and take responsibility for this. It needs to review its monitoring and reporting process to ensure that all relevant bodies can work effectively together to deliver maternity services that are value for money and fit for purpose."
James (not his real name), a recipient of medical negligence money, told the Today programme the money had helped give his son a better quality of life.
He and his wife did not claim for negligence until six months after the birth of their son, when they realised the costs involved in his care. Their son had been starved of oxygen during birth and now suffers from quadriplegic cerebral palsy, severe brain damage, visual impairment and epilepsy.
Health Minister Dr Dan Poulter said the health service should always learn from any mistakes to improve patient care in the future.
"The NHS remains one of the safest places in the world to have a baby, but on rare occasions care falls below acceptable standards and unsafe care should never be tolerated."
He said the service was making progress.
"This report shows that most women have good outcomes and positive experiences of maternity care. We know 84% of women now say they have good care, which has gone up from 75% six years ago. But we are determined to improve further."
Royal College of Midwives chief executive Cathy Warwick said the report backed up what the college had been saying for a long time.
"We are many thousands of midwives short of the number needed to deliver safe, high quality care. Births are at a 40-year high and other figures out this week show that this is set to continue. As the report states, births are also becoming increasingly complex putting even more demands on midwives and maternity services."
Royal College of Obstetricians and Gynaecologists president Dr David Richmond said the NAO report raised valid concerns.
"Although the UK is generally a safe place for women to give birth, we have known for some time that pressure on maternity services is growing in some areas, particularly inner city conurbations, placing stress on clinicians, managers and patients alike."