The Insurance Council is rejecting Labour Party proposals to set up a specialised Earthquake Court, saying it could make the whole process drag out for longer and the only winners would be lawyers.

Labour leader David Cunliffe earlier today released the first of the party's policies aimed at lifting the Canterbury recovery effort. These included a special court to deal with unresolved insurance claims of up to $1 million. The Crown would pay for lawyers' and witness fees, and recoup expenses through a levy on insurance companies and the Earthquake Commission, proportionate to the awards granted by the court.

Read more: Labour promises Earthquake Court for unresolved insurance claims

Mr Cunliffe said he would resort to "alternative regulatory means" if the insurance industry did not act in good faith with the new system.


But Insurance Council chief executive Tim Grafton said the policy was "misguided".

"The idea of creating a situation where effectively you are forced by the state to pay people to sue you is totally rejected and would set a very bad precedent for the future."

He said the present system was working well.

"At the end of December 2013, there were 2600 customers with undecided claims. But by the end of March 2014, the number had reduced to 1500.

"The supposed justification for this misguided policy is Labour's statement that 10,000 insurance claims have not been settled. The reality is that 87 per cent of the 22,500 over cap claims with insurers have been settled or agreement reached with the customer.

"There is only a very small fraction of claims that may be in dispute."

He said an incentive of free legal fees would see people bypass the freely available disputes resolution services, which would only clog up the court further.