This artificial hate is a form of entertainment
You feel elevated and belonging to a certain bigger group by bashing the other one.
There are no lore reasons for this. It is just TEAM A vs TEAM B. Have you ever seen a soccer match between two neighbouring villages in Bavaria, Germany?
The other team is described as inept retards, but if your team wins, it is a great victory. :>
Outside of AB's, the luxon/kurzick difference vanishes. "You are a Luxon? Eeeks!" - but that was it. Nobody cares about it. People are still trying to figure out if Luxons belong more to this or that social group and Kurzick to the other. Kurzick are mostly put in the Emo-bag, Luxons are young kiddies playing pirates. So much about simplification.
It just creates problems when you join an alliance that fights for another faction. Then you have to ask for guest invites of guilds of the other side to fight in their ABs to continue raising your preferred title track.