Eh, I like it; whether it's "bad" or not is very much subjective. Can see how it could be annoying if you're playing in the dark or have more sensitive eyesight, though. Or, heck, if you just don't like it. But making it a proper settings toggle seems iffy to me - it's a slight advantage to have it off, so you'd probably want to do it regardless of how you feel about it, at which point you might as well remove it entirely. Which brings us back to the point re: me liking it.
Actually do people like something or not is a subjective thing. How effects look, models and similar can be objectively looked at. In this case, this effect is nothing more than a white screen for a second, compare that to something like a multi explosions with maybe parts falling apart after the ship is destroyed, the effect objectively looks bad.
Its your game, and you will make it how you like the best, but when it comes to graphical options, I suggest you first to consider that this is not a competitive pvp game, and second more important, you should not look at graphic options do they bring benefit or not, but offer as much as possible customization as you can. Its a very strange logic to say because the game works better without that effect, you should not put it as option in the game and force it on everyone that doesnt look at mods. You can as easy pretty much say that playing the game on minimum graphics options players get benefit as they will have higher frame rate, so let's remove all options (or whenb a lot of games have camera shake, or motion blurs, and most of them its a toggle option, even for competitive online games).
Put that option in so people can easily remove it, and dont leave it as config option in files that people need to mess around.
The effect is problematic because of three things, it doesnt look good (its only a white scree), it happens to often (change it to happen only when capitals are destroyed) and third you cant see anything. Best effects and explosions are those where you can actually see what is happening and how a ship is destroyed/falls apart.
Anyway the new update made the game a lot more fun, and starting from beginning feels less tedious with a lot more things i can find to fight. Also love that I get $$$ for killing enemies of my allies.