Insurance company settles police excessive force case. Effect of such practices?

Many hope that money damages under federal civil rights statutes (e.g. 42 U.S.C. sec. 1983) will deter officers and agencies from future violations.  The presence of insurance clouds that picture.  In a case from Florence, CO, the company on it's own decided to settle for a $32,500 payment to a woman who alleged that a city police officer used excessive force when he used a stun-gun on her while she was handcuffed in a patrol car.  The insurer felt that a trial alone would cost more than the settlement figure.  Does this discretion by the insurer hurt the deterrent effect and/or encourage frivolous claims?  If course, the insurance company can always raise its rates and take the risk that they will be dropped.  This is a complex, but important issue.  I don't claim to know what the answer is. How about you?