Put yourself in the other player's shoes (that's what nice people do -- this applies to real-life too).
Now imagine that you've just got a car (say it's one you stole from an NPC) and spent loads of money pimping it out. It's shiny! You're very happy with it :-)
Then one day a 'bad sport' comes along and pops a sticky bomb on your car and blows it to high-heaven.
You're upset. But then you realise that you didn't get insurance. D'oh! And that makes you even more upset :-(
You take this pent-up rage and go off to find other players' cars to blow up. You don't care if it's the same guy who just blew up your car, or just some other chump who caught you on a bad day. To satisfy your rage you blow up 10 players' cars.
Those 10 people then get angry and go around blowing up even more cars. This spirals out of control until the world of GTA becomes a ghost-town, with everyone gunning each other down at every available opportunity. At this point you've got Mors Mutual Insurance on speed dial, and it's getting really tedious.
I guess that's why R* had the forethought to banish all those d*cks to their own wasteland, to blow up each other's cars. I have been in a few lobbies where my car gets blown up every 5 mins, but thankfully they are few and far between, mostly because of the 'bad sport' system.
So kids, the moral of the story is: don't be a d*ck. (and make sure you have insurance, just in case you do come across any!)