That sounds like a really bad idea. Pay the insurance, fine. That's a good idea actually. Instead of paying your insurance company, you pay the company that built the software for insurance. Then the software/insurance company pays for any damages caused by the car. The best software could offer the cheapest insurance.

But put developers in prison for 20 years because the car crashed, that's untenable. You wouldn't have decent standards, you just wouldn't have anything at all. What kind of developer would put themselves in that position? Everyone makes mistakes. All complicated software has bugs. You would only have software made by fools, and marketed by fools, that was much more dangerous.

If someone makes software that reduces accidents from 10% of drivers per year to 0.1%, they still cause 100,000 accidents a year in the USA, maybe a few thousand fatalities. Give them the electric chair right?

If you are going to punish them for the mistakes, will you reward them commensurately for success? For every life they save, can you give them a life?