Speaking in the House of Commons, Mr Cable acknowledged reports by whistleblowers that employment agencies had been involved in mis-selling such insurance policies to low-paid workers.
While stopping short of backing a public inquiry, he pledged to investigate a string of allegations made about six agencies.
His comments came after Chuka Umunna, Labour MP for Streatham and shadow business secretary called for a government probe into allegations of personal accident insurance mis-selling.
He said: “Does the business secretary agree that for an employer to mislead workers into purchasing personal accident insurance, the charges for which would take workers’ pay under the minimum and the purchase of which is not necessary given employers’ own insurance cover, would be completely indefensible and possibly unlawful?”
Mr Cable responded: “I will commit to ensuring that we have proper enforcement procedure. The honourable gentleman has listed more companies and will investigate them and that may well merit a more broadly based inquiry.
“He has identified a legitimate case of abuse and I recognise that we have to deal with it.”
Personal accident insurance is not as wide-ranging as income protection, but tends to pay set amounts for conditions such as £25,000 for the loss of a limb or eyesight. Workers should look to income protection for a full range of cover against illness or injury.
Tom Conner, director for London-based insurance adviser Drewberry Insurance, said: “It seems as if the agencies have been treating PAI like any other consumer good, without recognising that it is a regulated financial product where it is essential to treat customers fairly.
“This highlights why advisers complete a full factfind with clients to understand their current position before making any kind of recommendation or sale. It is not a bad thing for agencies to recommend their workers consider it, but they should partner with a qualified adviser to deliver the proposition, ensuring that a needs assessment takes place before any sale is made.”