The existing situation favors quick-witted people who can fire back another insult and come away unharmed. But your proposal favors physically advantaged people

The existing situation favors quick-witted people who can fire back another insult and come away unharmed. But your proposal favors physically advantaged people who are strong/brave/skillful enough to punch someone. I don't think it's clearly better, just different. It's also how it works in lawless societies where everyone has to protect their honor using violence otherwise they'll be seen as an easy target and get abused by everyone else. That includes, school, prison, and countries with poor rule of law. It seems like a default way for humans to behave in the absence of civilization. It's also an almost uniquely male behavior, so women wouldn't really function in this system very well. They may make alliances with and become dependent on men to protect their honor on their behalf.