I'd say that by the time you're considering jail, it's too late—these situations are better avoided than rectified.

Per the article, one of the officers was evidently particularly stupid—he failed police academy once and was disciplined for entering a women's restroom because of crimes he imagined could be happening in there. No one wanted to say "you're too stupid to be making high-stakes judgment calls", so they let him keep trying until he was running into an alleged emergency "with no plan," where he shot an innocent person eight times...and then handcuffed him...

I think actuaries have a way of employing statistical realities that would, in a legislative context, precipitate too much defensiveness and bickering to ever be the basis of a rule. Like I think it was quite a while before neuroscience could fully explain why insurance companies wouldn't cover rental car drivers under 25, instead of 16 or 18.

An insurance company would give departments a reason to say "anyone who has ever failed police academy gets pepper spray and that's it." Departments can decide how to deploy that person.

(Ideally that person wouldn't be a cop at all, but departments will probably always be pushing to hire. This way the argument is between departments and the comparatively highly-informed insurance market, and not voters)