I think the main effect apart from the brightness is that every pixel's colour is smoothed out into the surrounding pixels. A bit like what the inherent motion blur does with 24fps cinema film.
All of that said, I would love for you to have it 100% correct, because I fucking loathe insurance companies
The vast majority of accidents are caused by bad judgment from the driver, and to a lesser extent - poorly maintained vehicles (which will be mostly resolved when EVs are mainstream anyway). It was probably originally enforced due to potentially wrecking an innocent's car (as you decide if you want to risk things if it was just your car at stake).
Yes, okay, car insurance will still exist (contrary to my initial post), but it will be like say, buildings insurance - very low, and non-forced (people won't have to insure if they don't want to).
Insurance at that point would be seen as pointless, and so the government would not require insurance like the 'good ol days' (read "bad old days").