It can be seen as less than a person because of precisely what you said about “it” being used to talk about singular objects and animals. Many people like to distinguish themselves from nonhuman things, and so wish to use a more unique pronoun. “They” is also already a part of English, so using “They” as a new non-gendered pronoun is not culturally a big stretch.
*Edit: As I’ve learned through the comments, the usage of “They” in a non-gendered context is not new and has historical precedent.
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