It is not really complicated to understand why people do not use paper wallets to secure their bitcoins, paper wallets are very secure but if you want to use your bitcoin then it becomes very rapidly a hassle to use them, those that keep their money in an exchange are doing it out of convenience, that way they have access to their bitcoin no matter where they are in the world, so as you can see it is a matter of priorities, if your priority is to keep your bitcoins safe and secure then a paper wallet is one of the best choices, but there are people that have different priorities and they prefer convenience over security.