Amina Inloes, Amina Inloes is originally from the US and has a PhD in Islamic Studies from the University of Exeter on Shi'a hadith. She is the program leader for the MA Islamic Studies program at the... Answer updated 1 year ago

The main reason is that it was not mandated by the Prophet; in fact, he prayed with his wife and daughter there.

Also, (a) because to do tawaf you have to go all the way around the Ka'bah, and that is difficult to do with segregation, similarly it might be challenging to arrange gender segregation for sa'i between Safa and Marwah, and (b) perhaps it could cause hardship for people travelling together. 

While it is true that there are some people with sick minds who misuse the arrangement there, by and large, I think most Muslims behave themselves properly there and respect the sanctity of the place, and the rules of ihraam (forbidding certain things between genders) also provide extra incentive to behave correctly, even if they may run into each other by accident.

That being said, wearing an extra outer garment can help provide more personal space without inconveniencing others.