It's not hard to imagine: Officer X does something bad through incompetence, Officer Y tells the truth about it, and then all the other officers take revenge on Y for "being a snitch" and "screwing our pensions."
Once that pattern is in place, it continues even when Officer X is committing crimes, not just making mistakes.
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.
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.
