Local authority insurer Zurich Municipal is warning that councils could face a deluge of compensation claims if they fail to prepare for the Human Rights Act that comes into force in England and Wales in October.

However, the Law Society in Scotland, where the act was introduced last July, said it was unable to find a single lawyer who had dealt with a human rights related compensation claim.

The act allows people to challenge decisions taken by public bodies if they are alleged to have breached their basic rights.

Currently, claimants seeking compensation have to travel to the European Court of Human Rights in Strasbourg to seek redress.

Zurich Municipal, which deals with 90% of UK councils, gives a number of examples of how people could challenge public bodies, including councils, from October 2. For example, gypsies will be able to claim that restrictions on their movements may infringe their right to peaceful assembly, and care home residents may argue that closing their accommodation undermines their right to a private life.

Other rights being enshrined in UK law, are the right to property and to an education.

Rachel Coventry, Zurich Municipal spokeswoman, said: "The incorporation of the European Convention of Human Rights into UK law could land organisations that fail to prepare in court, but many of the dangers can be foreseen."

She added: "Councils can protect themselves by conducting audits to assess their compliance with the new law. Those which fail could find themselves facing a flood of legal challenges."

Home Secretary Jack Straw has meanwhile urged councils not to panic.

Addressing a meeting at the think tank, the Institute of Public Policy Research, he played down the implications of the act by paraphrasing the Bible.

"Do as you would be done by. Do that and then we will be more than half-way there," he said.