When it comes to honesty and ethics, the public ranks insurance companies only slightly above used-car salesmen.

So David Cunliffe cannot really go wrong in committing Labour to setting up a state-owned general insurance firm, KiwiAssure - especially at a time when private companies' premiums are soaring through the roof and their cover is falling through the floor.

The Labour leader will be lectured on the perils of the insurance market and putting taxpayers' money at significant risk. The purists can weep. They will just have to get used to Cunliffe using the clout of the state. The test will be whether such intervention works.

With by-election campaigning in progress in Christchurch East, Cunliffe will face accusations he has made the promise to shore up support in a Labour-held seat where earthquake-hit residents have had lengthy battles with their insurers.

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That argument does not hold water. Labour's policy comes too late for those voters. What the policy does do is show the party is on the people's side, rather than being neutral, about the pricing behaviour of foreign-owned companies.

It also shows the degree to which Labour has shifted to the left. In 2002, Labour took a lot of convincing when Alliance leader Jim Anderton set out to establish Kiwibank. Yesterday's announcement proves that hesitancy no longer holds.