I thought it was for a completely different reason...
If your car is involved in a bad accident it notifys the emergency services that you were carrying a baby. It was a response to a few instances where the fact that a baby/child was in the backseat was overlooked due to state of the car wreck.
If your car is in a bad accident and wrecked to the extent that the baby could be overlooked, surely the baby on board sign wouldnt have survived?