That's to err on the safe side. The insert was never tested with insulation packed all over it so no-one can say whether the outer jacket could overheat.... By attaching the insulation to the fireplace walls you leave an air gap to keep the jacket from getting too hot. I did this on my install with rockwool batts covered by sheet metal Tapcon'd into the mortar joints. A well sealed block-off plate is more important IMO as moving air carries heat quickly. Also if you do this don't insulate the surround panels as you want heat to conduct through them into the room. I mention that 'cause some inserts come with insulation for the surround.