I'm a cyclist.
Dogs often go after cyclists. I had two encounters on the same trip the other night. Fortunately no injury.
I suppose they may be thinking particularly of criminals' weapon dogs and making possession of such a dog an offence without the limitations of the Dangerous Dogs Act. Or perhaps it's about hunting dog packs, which regularly attack people, animals and property, but theoretically not foxes any more, unless they happen to find one while they're out and about. And anyway, very expensive to insure.
Don't they get a bent vet to cut the chip out of a stolen dog?
Compulsory insurance may have problems as described, but I'd expect insurers to offer cover for a lower premium if the dog is properly trained or is kept away from the general public.
I'd make the compulsory implant larger and with a stun as well as a "don't do that" function and let's say Bluetooth. Chihuahua would not require a huge device for that, German Shepherds something stronger. There are some complications so I'll let our legislators hammer out the details.