Because hermaphrodites isn't the right term, and having both totally accurate genitals is pretty much impossible. There's however indeed something rare called intersex, but it's way more complex than "having both genitals" or "having a mix of both", and can be unique to each intersex person. Also, hermaphrodite has been used as an insult towards intersex people.
This is the best explanation. We're not a fantasy game here, there's no transformation potions or magical creatures. There's been discussion about intersex before, but until we're sure we can add something respectfully we don't want to start adding it at all.
"Both sets of genitals" in a "herm" fashion is often a porn game fetish, along with stuff such as "futa" and the like. As we're trying to make a more realistic, grounded, and respectful game, we're not going to add something just because it's in all those other games. We let the fetishes be kinks, not people.