Thousands of people are being left to die from industrial diseases without receiving the compensation to which they are entitled.

Diseases such as mesothelioma, a deadly form of lung cancer usually caused by exposure to asbestos, take 30-50 years to emerge but kill their victims within 18-24 months of diagnosis. Victims are often unable to track down their employers' insurance company after such a long time has passed, lawyers have warned.

Campaigners are urging the next government to push ahead with plans for a new Employers' Liability Tracing Office to help victims contact their employers' insurers, as well as an Employers' Liability Insurance Bureau to provide a fund of last resort for those still unable to find them.

In a consultation which concluded a week ago, the Department for Work and Pensions set out plans for the tracing office, which will include an electronic database of employers' liability insurance policies.

When a person is injured or made ill as a result of the employer's negligence they would normally claim civil damages from the employer. But some have found it impossible to trace their employers' liability insurance policy to make a claim.

Some victims of industrial disease would not know who their insurer was at the time they contracted the illness. By the time they had been diagnosed with the disease, the employer may have ceased trading, shredded the old insurance records or even lost them.

A voluntary code of practice for tracing employers' liability (EL) insurance policies was set up in 1999 and has led to some improvements, but many individuals are still left without help – 3,210 in 2008.

Muiris Lyons, the president of the Association of Personal Injury Lawyers (APIL), said: "All employees have the right to go to work and come home unharmed. But when they are injured or made ill by their employers, they must be able to claim fair compensation for their injuries.

"To do this, they need to be able to trace the insurers of their employers, but in too many cases, particularly when the employer has gone out of business, this cannot be done, either because policy information has not been properly preserved or because the current tracing system, administered by the ABI [the Association of British Insurers] just does not work."

APIL would like to see a fund of last resort set up to act as a safety net for those who cannot claim compensation for workplace injury and disease, backed by a compulsory database of employers' liability insurance policies.

Emma Costin, partner and the head of industrial disease at Simpson Millar LLP in Cardiff, said: "There is an enormous need for a system that can quickly and effectively trace the responsible insurers. Allowing the insurance industry to self-police the database is ethically questionable.

"The insurance industry has shown itself to be incapable of running a tracing system and reform is long overdue. The results are erratic at best and the successful trace rate is woefully poor, even for the period after EL insurance was compulsory.

"This isn't just money. It's about the fact that for decades employers allowed their staff to work in asbestos-filled environments without warning or protection from harm. Where a business is long gone and the records cannot be found, some insurers are able to simply 'dodge the compensation bullet'. Unfortunately, people suffering from mesothelioma and other asbestos-related diseases can't dodge their illness. Mesothelioma is a devastating illness. Often it is a race against time to ensure the victims get what they deserve before they face a very cruel ending."

The ABI opposes the Government's plans, arguing it would be unfair to law-abiding employers who might be forced to pay for their potentially uninsured competitors.

Nick Starling, the ABI's director of general insurance and health, said: "Insurers pay out £1.5bn a year to employees covered by employers' liability insurance. And the insurance industry is committed to helping those people injured at work who need to trace an employer's liability policy to claim against.

"This is why insurers will be investing around £30m over the next 10 years into the Employers' Liability Tracing Office to help claimants trace employers' liability insurance policies. However, the creation of a compensation fund for those unable to claim will impose an ongoing cost for employers who abide by the law and take out employers' liability insurance, through higher insurance premiums.

"And having such a fund could encourage firms to break the law and not take out this cover, knowing that there is a fund to compensate. In short, there is a serious moral hazard in this proposal."

Case study: 'I am running out of time and want my family taken care of'

Michael Stone, 71, from Folkestone, was diagnosed with rare and fatal asbestos-related lung cancer in August 2008 after going to see his GP about a pain in his ribs.

Most sufferers do not survive longer than two years after diagnosis. Mr Stone now struggles to breathe, is unable to walk more than 200 yards and spends long periods asleep.

"I had been decorating the house that week and assumed I had overstrained myself," Mr Stone explained. "But a chest x-ray found a pint of fluid and spots on my right lung, both linked to asbestos exposure from the past."

In 1963 Mr Stone joined Burgess Welding & Engineering Ltd, a Dover-based firm which manufactured parts for ferries. "I clearly remember working on HMS Aerial, the ship that laid cables along the English Channel," he said.

He worked in the engine room where he replaced boiler tubes."Both the boiler and the pipes were lagged with white-plaster asbestos," he said. "I remember clearly how there was always a lot of white dust all over the engine room and on the surrounding surfaces. The atmosphere was filled with dust particles but at the time I thought nothing of it and simply brushed it off my clothes."

Unfortunately, no insurer can be traced for Burgess and without insurance details Mr Stone will not be able to claim compensation. His only hope is that a former colleague might hold the crucial information that would ensure he gets the compensation he deserves.

"The foreman was Ken Sutton, and I knew a man called Bob Cavell who also worked as a welder," he said. "I am running out of time and just want my family to be taken care of when I'm gone. For that to happen I need someone from back then to come forward." Mr Stone's legal representative, Emma Costin, can be contacted on 0844 858 3600.

Sarah Cassidy