There are two insurance-related police reform ideas being discussed.
One approach focuses on municipal liability insurance. Many municipalities do not purchase liability insurance to cover lawsuits against officers, instead choosing to self-insure. This is potentially a problem because insurers actually play an important role in loss control. They provide information and services related to procedures, training, the risks posed by individual officers, etc.
The second proposal would require individual police officers to purchase professional liability insurance, in the same way that doctors and other professionals do today:
In response, we propose an innovative, market-based solution – mandatory professional liability insurance for police officers. Much the way that drivers with terrible records may be forced off the roads by high premiums, officers with the most dangerous histories, tendencies, and indicators might be “priced-out” of policing by premiums that reflect their actual risk of unjustified violence. Potential reductions or increases in premiums would create systemic effects by incentivizing both departments and individual officers to adopt policies, trainings, and procedures that are proven to lower risk. Insurance companies, an outside third-party removed from local politics, would be in an ideal position to assess indicators of risk actuarially and set premiums accordingly.
My sense is that neither of these proposals are magic bullets, but they may be worth trying.
Under the first proposal, municipalities that buy insurance would have less of an incentive to prevent lawsuits than they do when they self-insure. The loss control expertise of insurance companies may offset this, but municipalities that self-insure can (I assume) purchase loss control services today. They may choose not to do so, presumably because of pressures from police officers and unions, because “loss control” includes things like getting rid of problem officers. This is the heart of the political problem, and insurance will not make it go away, though it may help create pressure for reform if it makes better information about the costs of poor policing available.
Forcing municipalities to purchase insurance may also help if municipal governments that self-insure do not put aside adequate funds (“reserves”) to pay for wrongdoing by police officers that occurs today. By under-reserving for today’s wrongful behavior by police, city officials can pass the costs of poor policing practices on to future officials and taxpayers. If municipalities purchase reasonably full insurance, the expected costs of lawsuits from current policing practices will be reflected in the current insurance premium. This will increase the incentive of city officials to reduce behavior that leads to lawsuits. It seems to me that this may be the main advantage of both proposals.
The same problems would arise under the second proposal. In addition, the prices charged to individual officers would quickly be politicized, just as they are in many other areas of insurance. More subtly, full experience rating of officers may not be desirable because it exposes officers to too much risk.