This doesn't come from the Government at all.
It's from an organisation called The Motorists' Forum. Ever heard of them? No, neither had I until this morning. They call themselves 'government advisors', but that could be a multitude of things. Just a self-appointed pressure group.
Even Safe Speed, another pressure group I've never heard of, says this is a bad idea. I guess this will be just another nine days wonder.
On the other hand, your idea about insurance discs is a great one. You do wonder why it's never been used before. There may be problems with large fleets and rental vehicles, but they could be overcome, I'm sure.
Good idea