Class 1 armors all require normal resources you can get through the transmutator without ever having to leave green zones. When you get to Class 2 and 3 however you need items found on mobs, bosses, hellgates and sometimes in zones that are yellow/red. The class 1 armors can provide a fair bit of protection for you but are better for open world combat where you might have larger numbers and imbalanced fights.
When things get competitive such as the 5v5 then all players will be trying to get the highest class armors to reduce the risks of loss.
There is a number of reasons for the combat system being the way it is and I will list a few of them.
The system divides the game's Crafting side from its Combat side. Combat players earn most of the silver but rely on crafters. Crafters make most of the gear but rely on buyers to earn silver.
The Class system creates incentives for players to leave the green zones but does not punish them too harshly for choosing not to loose your Albion Online Items. If you decide to stay wholely ore mostly in the green zones then you can still produce weapons and equipment that can be viable in a PvP situation or against PvE mobs. Meanwhile if you want to be competitive you will need to venture into Red zones eventually to get the needed supplies for crafting.