Earlier quoted context omitted.
And insurers doing their due diligence and charging based on potential for liability would go a long way to mitigating abuses. Best solution would be to simply require licensing and conduct standards to be a police professional similar to that required for Registered Nurses.
Is privatising ethics enforcement like this a good idea?
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.