Insurance costs could fall by as much as 40 per cent as a result of the bringing into operation of the Personal Injuries Assessment Board and other measures, according to the Tánaiste.
Ms Harney was signing the order making the new assessment board operational yesterday.
Since midnight last night it is mandatory for all claimants seeking compensation for injuries at work to submit their claims to the PIAB.
Only if liability is contested by the respondent will the claim be released for processing by the courts.
The claim, for which there will be no oral hearing, must be accompanied by documentary evidence.
It will then be assessed by expert assessors on the board, and will cover both special damages such as loss of earnings, medical costs and out-of-pocket expenses, and general damages, covering pain and suffering.
Lawyers will not be involved (unless privately retained by the claimant, and the costs will not be recoverable) in drawing up the claim. The PIAB will publish shortly what is called a book of quantum, which will contain guidelines for compensation.
If either the claimant or the respondent (usually an insurance company) rejects the assessment, the case will then go to court.
Ms Harney pointed out yesterday that legislation covering how such claims are dealt with by the courts - the Civil Liabilities and Courts Bill - is currently going through the Oireachtas, and is expected to be passed by the summer.
She said that reducing false and exaggerated claims would further reduce the cost of insurance.
Asked to quantify the reduction, Ms Harney said that a hotelier in the Border area had told her recently that his insurance premium for this year was reduced by 42 per cent compared with last year.
A number of employers had reported reductions of 30 to 40 per cent, she said.
The Road Traffic Bill would lead to the reduction in road accident claims, she said.
Motor insurance will be brought within the ambit of the PIAB in the autumn.
The chairwoman of the PIAB, Ms Dorothea Dowling, pointed out yesterday that the requirement that the plaintiff furnish full details of a claim to the PIAB, which will be available to the respondent, was also in the Civil Liabilities and Courts Bill.
This demand for early disclosure of all details of a claim will therefore be a feature of both the PIAB and the courts system for dealing with claims by the autumn, she told The Irish Times.
She rejected the view expressed by representatives of the legal profession that this would lead to unfairness against claimants.
Ms Harney accepted that the new regime would lead to a reduction in the overall income of the legal profession. "But I haven't done this to penalise lawyers," she said.
"I have done it to benefit genuine accident victims and, ultimately, all those who have been paying excessive insurance premiums for far too long."
She said she also hoped there would soon be more competition in the Irish insurance market.
Welcoming the official introduction of the PIAB and calling for all interested parties to give it full support, the Irish Small and Medium Enterprises Association said it should act as a catalyst for meaningful reform of the insurance industry.