My insurance company has an app that will display my proof of insurance - just hand your phone to the police officer at the stop.
The trouble is you are legally surrendering the possession of your unlocked phone to a police officer who can then search through it. I asked a lawyer friend about this and he said the law doesn't allow you to granularly declare the terms under which you surrender your property (ie you can't say "don't look at anything else officer, just keep that app window open").
It's the same with finger prints as biometric - no one considered that you can plead the 5th when asked for a pin code but you can't decline to have your fingerprints taken (including on your own phone sensor). I'm assuming face recognition is same.
Back to this Apple Wallet announcement, TSA scanning is a very restrictive usecase that feels like just a wedge otherwise it's pretty low value.
But then why would anyone want to hand over their phone to the police (or another government agency) so they can take the phone with the ID on it back to their cruiser to write up your ticket. Of course they are going to have a quick search through your phone. That's not paranoia, that's good police work on their part.
Adding your government ID to Apple Wallet just seems like something that sounds technically cool but not properly thought out OR will only have very limited usecases.