The Insurance Law Service faces closure due to government funding cuts, Principal Solicitor Katherine Lane warns.

Legal Aid NSW has indicated it can no longer contribute $300,000 a year to the Sydney-based operation, which has run since 2007 as a consumer credit legal centre scheme.

No formal reason has been given, but Ms Lane says funding cuts by the NSW and Federal Coalition governments are to blame.

She says a petition to save the national service has been signed by about 600 people and will be sent to Attorney-General George Brandis, whose department contributes $70,000 per year in funding.

The service has three staff who answer about 4000 queries a year and represent consumers in about 100 cases.

“We will have to start winding down in July and will probably have to close by the end of the year,” Ms Lane told insuranceNEWS.com.au.

“There’s a huge amount of demand for this service, which is the only one of its kind in the country… it’s really critical. It’s a big loss.”

The funding from the Attorney-General’s Department is insufficient to fund even one solicitor.

The service’s key areas of concern are car and home insurance, with most cases involving insurers denying claims.

Ms Lane says the purchase of policies online by low-income, disadvantaged and non-English-speaking people is “a big cause of trouble”.