It was a bit too sensitive. We were pouring over videos on here to spot the instant where the car ahead suddenly gained an extra few kph or the car behind lost a few kph to figure out if there was actual contact to explain a 10 sec penalty for the car behind, plus 1 sec for the car ahead.
However it was not reversed for the masses. The FIA races looked like penalty trains with people serving penalties in corners creating more chaos. It looked bad, not like racing anymore with cars stopping to serve penalties all over the place.
Races were cleaner after people adjusted and it was much needed. I remember my DR going up 30% or more (I was still qualifying back then) as a result of not getting punted off all the time anymore. As for players leaving, they leave for unfair penalties and they leave for too much bumping in races. It all comes down to penalties not working right. Make it more strict, too many people get wrongly punished. Make it too lenient, clean drivers disappear into qualifying or lobbies to avoid DR loss or frustrating bump races.
Lag is a big problem as well and while player count suffered, when the servers were split, racing was better for a while. The problem was, in off peak hours the player count was so low, lower SR was added to fill the rooms. It was only better during peak hours when you could finally get a full (mostly) lag free SR.S room. The server split was reversed, yet player count is still slipping and now we have laggy races with lower SR added during off peak hours, a penalty system that hardly does anything anymore, driving more people away.
Imo PD has always gone about it the wrong way. Instead of only using the stick method, add substantial rewards for clean passes, contact free races, clean laps. The clean race bonus as it is now is not much of an incentive and way too unreliable based on the track. Plus SR is way too volatile. People that generally stay at SR.99 should not be matched with those that enjoy weekly DR resets. There's plenty else that can be tweaked to clean up races next to the penalty system.