The Victorian Competition and Efficiency Commission (VCEC) recommends reforming the Wrongs Act to improve compensation for claimants.

It says the changes would increase public liability and professional indemnity premiums by up to 5%.

The 1958 Wrongs Act was altered significantly in 2002 and 2003 to address spiralling public liability and professional indemnity premiums.

Premiums were reduced but the rights of plaintiffs were restricted, with some legitimate claims denied compensation.

The State Government asked the commission to carry out an inquiry, and its final report recommends a package of measures to restore balance.

It advises reducing thresholds for spinal and psychiatric injuries and providing additional pain and suffering compensation for the severely injured.

More injured people and dependants should receive compensation for economic loss, and a limited entitlement for loss of capacity to care for others should also be allowed.

The report says limitations on personal injury damages should be revisited before full implementation of the National Disability Insurance Scheme.

The Australian Lawyers Alliance welcomes the changes but says they do not go far enough.

Spokesman Geraldine Collins says a particular disappointment is the failure to add a narrative test to provide a more flexible option for assessing the impact of injuries.

The State Government supports most VCEC recommendations but takes issue with the suggestion that common law motor vehicle claims should be subject to the limitations of the Act.

The Victorian Parliament is not sitting currently, with state elections due on November 29.