I would say this:
"I'm feeling pretty uncomfortable about something, and I need to get it off my chest. I noticed that not all the kids are in carseats when they leave here, and I just wanted to say that I would feel better if they were in proper carseats. I'm not sure if you know the nitty gritty details, but a child is required to be properly restrained in a carseat until ______."
Them: "Oh, yes, of course. But we're just going a couple of blocks."
Me: "I realize that, but as a daycare provider, I have to be sure that my kids are going to get home safe. Are you able to get another carseat, or do you want one of mine?"
Them: "Oh, that's not necessary. I'm a good driver. LIke I said, it's just a couple of blocks."
Me: "It's not a choice, really. It's the law. If anyone saw you driving them while not restrained, they could call the police."
Them: "Oh. Yeah. Well, it'd be better if you'd mind your own business."
Me: "I'm doing exactly that. I'm going to revise the childcare contract to require anyone picking up any of the kids to have a properly installed carseats for each child. Are you going to be able to do that? If not, we'll need to talk about you finding another childcare provider."
Or something along those lines.
And if it were a stranger, I'd call 911. I have done, and I've seen the cops come and ticket them. They take it seriously. As would any sane person. I'm a paramedic, and I've been to calls where the children were lying dead or dying in the middle of the highway because they'd been ejected from the vehicle because they weren't properly restrained. I've also seen a small child nearly cut in two from being restrained by just a lap belt. This isn't a 'parenting style' issue. It's a life and death safety issue.