The cost of police brutality is enormous.

First and foremost, of course, it is paid in lives: According to the Washington Post database, U.S. police have shot and killed 1,042 men and women in the past 12 months, of whom Black people make up a disproportionate number. That doesn’t account for those not killed by firearms, such as George Floyd. There is no official record of police brutality in the US.

But police brutality also has a cost in dollars, often borne by taxpayers, and it’s not a small bill.

In New York City, for instance, out of a total $1 billion spent in settlements by the city in 2018, nearly $230 million went to payouts related to New York Police Department actions.

Police malpractice is a huge cost for local governments—and therefore, on communities—and making these costs more tangible is significant lever in reducing police misconduct and brutality.

The potential of liability insurance

Typically, big cities pay for police claims (and other claims) from their central coffers—which are large enough to be able to settle bills of millions of dollars. But smaller municipalities don’t have the same luxury, so they buy liability insurance.

Whether provided by large insurance companies such as Travelers Insurance or Genesis, or by specialized insurers, these policies work in a way that is pretty similar to auto insurance policies: cities pay a premium, and the insurance pays out the claim once it’s settled.

As would happen with an auto policy, more misconduct bring more claims, and more claims bring higher premiums. When the premiums are no longer enough to offset the insurance’s payout, the insurer may decide to withdraw from that market, leaving the city to fend for itself.

This is a simple, but powerful mechanism—one that essentially flips the idea of government control over to private practice and uses a private interest to hold the government accountable. “Insurance companies are driven by dollars and not politics,” said Joanna Schwartz, a professor at the law school of the University of California, Los Angeles, “and insurers can increase departments’ and cities’ premiums or even pull out if [it represents] a financially risky behavior for the insurance company.”

As an example, in her research on the way governments pay for police brutality, Schwartz cites the case of an insurance risk manager in Idaho who had encountered some liability issues in a local county jail. To address it, he created a list of changes the jail needed to make—like having a nurse or medical personnel available—and extended it to all of the 44 counties part of the Idaho statewide pool,  and conditioned the low premiums on making those changes. The insurer gave them a couple of years to meet the requirements, with the understanding that if they didn’t their premiums would go up. The vast majority of counties involved made the changes.

Once a small- or mid-sized city buys insurance, it becomes the interest of the insurer to see instances of police brutality reduced, says John Rappaport, a professor of law at the University of Chicago who has studied the potential for insurers to disincentivize police brutality.

Local governments began taking out liability insurance in the 1960s. The practice became more common in the early 1990s, after the riots following police violence against Rodney King in Los Angeles, which made cities aware of the pervasiveness of police brutality. Overall, however, Rappaport says insurers didn’t consistently focus their attention on the costs of police brutality until recently, and instead were often distracted by other costs, such as claims for medical malpractice, or educational issues. This awareness has been growing in recent years—and surely helped by the protests and increased conversations about police brutality—and there are several examples of police making certain changes, such as requiring training, or wearing body cameras, to comply with insurance requirements.

Naturally, there is also the scenario in which insurer demands are met but the police brutality continues, and the insurance company decides to deny coverage. When the private insurer is out of the picture, there are still important opportunities to create financial disincentives for police brutality. A town, for instance, may decide to create a pool with other towns in the state and either pull together resources to self-insure (often by setting up an insurance-like structure, with a risk manager) or go to a private insurer, this time for the larger pool of towns.

In both scenarios, the pool brings in another level of financial accountability: police department aren’t then just accountable to their own local governments but to those of other towns as well, and, crucially, to other police departments. In order to reduce the costs caused by the misconduct of one specific department, for instance, another department could apply pressure toward better policing.

“It doesn’t always work quite that perfectly, but when it’s working well it can be really powerful,” Rappaport said.  “Policing has its own culture, and sometimes the message is going to come across better if it’s coming from other police chiefs than if it’s coming from a mayor, or an insurance trust.”

To insure, or not to insure

Yet even those who know the role liability insurance can play in producing better police behavior still struggle with the question of whether it would still be more effective to not have insurance at all.

Essentially, it is possible that having insurance makes police departments and cities less concerned about their violent policing tactics, because they don’t have to foot the bill in case of screwups. In economics, this is called a “moral hazard.”

“Whenever a company provides liability insurance, they are creating some moral hazard, and you hope that their efforts at loss prevention or risk management are going to be stronger than the force of the moral hazard, but I don’t actually know that,” said Rappaport, who added it’s a difficult to study because insurers are reluctant to provide data.

When a town is left without liability insurance, a few things can happen that demonstrate the true cost of police brutality, because they show taxpayers they are the ones ultimately footing the bill.

An uninsured town facing a bill too large to cover, might have to do what Inkster, Michigan, had to. In 2015, a $1.37 million police settlement forced the city of about 25,000 people to raise its property taxes, therefore making the financial cost of police brutality very clear to the community. “It is a way to make voters understand that they are the police,” Rappaport said.

Alternatively, sometimes cities can issue bonds—nicknamed by opponents “police brutality bonds“—but even this in some way sheds a light on the severity of the problem. Municipal bankruptcy could be an outcome, too.

Or, cities can dismantle their police department—outsourcing instead its work to neighboring department.

Shutting down a department is one of the few ways in which the cost could be directly felt by police officers, who are otherwise largely protected from directly paying the costs of their violent actions. Typically, police departments are indemnified by the city and while in some cities there have been proposals to get individual police officers to take out personal liability insurance (in Minneapolis, a campaign tried to get the measure on the ballot in 2016), many, including Schwartz, find the option a troublesome alternative to actual policy reform, because it places the responsibility on the individual rather than the system.

Most other scenarios leave police department largely untouched: Even after paying large settlements, for instance, cities are unlikely to revise their police budgets.

Big city, bigger problem

Pulling these kinds of financial levers is especially hard in large cities, because they typically don’t use liability insurance, and have budgets large enough to be able to absorb even very large police brutality claims.

Still, there are other financial pressures that can work at large city levels, too. Eli Silverman, a professor emeritus at John Jay College of Criminal Justice, says that the first thing to do, even in big cities, isn’t so much disincentivizing misbehavior, but to stop incentivizing it.

Policing activity in New York City, and many others that have followed its example, is managed by a quantitative system known as CompStat, which collects data on crimes, and police activity, Silverman explains. The measurement system is often misused, in the sense that it doesn’t provide a qualitative assessment of the policing methods. Rather, it only values productivity through numbers: How many stops the police makes, for instance, or how many crimes are committed.

“An administration just wants to be able to say that ‘we drove crime down’, and cares less about the ways this outcome might be obtained,” said Silverman, whose research led New York City’s stop-and-frisk policies to be found unconstitutional.

This encourages police intervention, because the premium is on meeting certain results. “Whistleblowers have talked about it, they have actually recorded commenders talking about ‘your summonses, your stop-and-frisks are not enough’,” Silverman said.

“So one thing we can do is stop incentivizing aggressive policing by stopping over-criminalizing,” he says, noting that reducing what constitutes a crime, particularly because many cases of police brutality take place over activities that shouldn’t necessarily be criminal, such as selling individual cigarettes.

A reduction of intervention could also be obtained through budgeting differently. An administration could require the police makes fewer stops, therefore offering fewer opportunities to resort to violence. This could eventually lead to a smaller, more effective and less costly police force, says David Eichenthal, a director of municipal budgeting consulting firm PFM. “If you have to hire 200 people you get a better quality of candidates than if you have to hire 500,” Eichenthal said.

However, he was also cautious about the likelihood that other budget interventions, such as investing in training to reduce brutality, would work strictly because of their financial benefits. In most cases, he says the payments for police misconduct are deferred, and municipalities have little interest in making investment that may pay out long down the line, and perhaps during another administration.

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