This subject is like the many religions of the world; everyone thinks theirs is the one, yet not one has gotten it 100% correct. No pun intended to anyone.
Bottom line, your preference may not be the other diver's preference and either both, or neither, are wrong. Colin hit it on the head. We are responsible for our own safety. I clip my flag to the scooter ring of my BC's crotch strap and I have the largest stainless steel clip Fill Express sells on it for one reason only; it's easier to reach and unclip it. I also carry a Dive Rite reel, with line that's rated at 15 pounds. If you think how easy a stubborn fish can snap 15 lb test monofilament line, then you have an idea how easy my line will snap if tangled on a boat's prop, notwithstanding that the reel's locking device will more than likely fail if hit is hard enough. Besides, between a flag and a diver, which one is more likely to give way first upon contact?
I keep very minimal slack on the line, at all times, for that purpose. This way if a boater thinks of my flag as a prize he/she will have a hard time picking up the flag from the water before I notice it and pull it back down, and the float is quite likely to get out of the way if it gets brushed by the boat.
Now, if you're talking about the most common rig dive charters prefer (yellow nylon lines with the big cross bone looking handle that you have to unwind and wind like an old rotary dial telephone), I can see how injuries to hands can happen with them.
BTW, I also have a boat size regulation flag on my tow buoy that will very soon be on a longer stick so it will sit higher out of the water.
Rick