That depends on what you think of existing liability insurance coverage, such as the one commonly sold to physicians.

The way I see it, if you are not granting immunity, and also creating the possibility of financial penalties, then you're creating an opportunity for arbitrage via pooling risk. I'm not horny for the "free market", but I think there have to be cogent reasons to ban such insurance, and I can't think of any.

Alternatively: Make the insurance come out of the collective pensions of the police department.

Seems better than the status quo, where there is no enforcement at all and instead taxpayers are hosed.

The public sector has been failing at this for decades. How can privatization be worse?

As opposed to doing nothing?

Yes, it's a good idea to try it as an a/b test in a finite run of municipalities.

Otherwise we are just doing the same things and expecting different results.

Right now in many police abuse scenarios there is no system in place that is recognizable as a working ethical system, bringing policing into some ethical system, even if just financially self motivated is definitely an improvement over nothing.

less ethics and more accountability. But a public audit committee is more than welcome to join in as well.