The Insurance Council is unimpressed with Labour's plan for a state-owned insurance company, saying it makes no sense.
Party leader David Cunliffe revealed the KiwiAssure scheme at the Labour conference in Christchurch.
He paints it as being a Kiwibank-style operation, giving people frustrated with big overseas players a home-grown alternative.
Insurance Council chief Tim Grafton says it would create an uneven playing field, and would probably dampening the enthusiasm of those who provide private capital to the insurance market.
``We are one of the most vulnerable countries in the world for the size of our economy and our exposure to natural disasters.
``What we need more than anything is to have large insurers providing the backing.''
Mr Grafton cites the $20 billion the industry footed for the cost of the Christchurch earthquakes.
Small beginnings are being promised for the state-owned insurance company Labour wants to set up.
Finance spokesman David Parker says KiwiAssure would start out small.
``The scope of operations will be houses, contents, vehicles and small business plant.''
Labour is confident New Zealand Post is capable of running such an insurance business.
It wants to set up a state-owned insurance operation along the same lines KiwiBank was set up, and for similar reasons.
NZ Post is currently dealing with major restructuring and has this week announced 2000 job losses
MP Clayton Cosgrove says, despite this, it could run an insurance company.
``This is a different set of products, a different set of clients with a different set of strictures. And I believe so, absolutely.''