And the police union has a bunch of influence over the other cops who might cause everyone's premiums to go up if they tell the truth?
I dunno, I think it's a good try but a more direct approach is warranted. Fire people with a history of complaints. Promote people who don't tolerate bad behavior. Vote for people who will do that, and if that means reconstituting the police force from scratch like in Camden so be it.
https://www.nbcnews.com/news/us-news/new-jersey-city-disband...
Presumably the same institutions that offer other forms of professional liability insurance. I wouldn't be surprised if the police union offered insurance, but they will have to compete with other insurers in the market. In this scheme, though, if they fail to adequately adjust for an officer's risk then they will either lose money or they will have to overcharge safer officers. The likely reality is that low risk officers would flee to the cheapest insurance and the police union would be unable to protect the riskier officers from higher premiums due to the lack of low-risk officers to balance out the pool.
Just solve the actual problem. Fire the cops that have lots of complaints. Promote the ones that enforce a healthy culture. Vote for sheriffs or comparable that have those priorities. Push for laws that enforce those priorities.
It's certainly no harder nor time consuming than designing and then waiting for a capitalist equilibrium. We know the actual problem, we don't need to assign a dollar value to it to prohibit it, especially since these are public employees.