Do you believe it is? If you don't think so at early levels, keep in mind when you hit 10, and above, you can easily lose a week or more worth of XP, and in some cases, from one death, can lose over a /months/ worth of XP. Not everyone has the time and inclination to grind out the XP they lose, and when you get into the teens, if they die and lose XP, grinding becomes something even harder as there are only a few quests to give XP.
Additionally, I do not believe the current system encourages RP in the least, it, in my opinion, causes there to be less with people just grouping up to grind XP which may be IC or OOC. There are alternatives. Some people have suggested Arelith's system. Another system I saw that worked well was a system that prevented you from getting hunting XP for a number of hours equal to your level, but you could still get DM XP, and Fairy XP.
Also, I firmly believe raises and ressurects from players should not give an XP penalty, or from the priest who charges 6k gold to raise someone. 6k is a fuckton of gold enough, let alone the person on the recieving end losing XP.
Comment below.