I wonder how common are setups where an internal person has access to the TLS private key part of the certificate or access to a network equipment that all traffic passes through, yet they cannot access the inputs required for hashing/encryption client-side?
This seems to mostly prevent accidental logging and is thus a matter of defense in depth, stopping malicious actors from exploiting it later — but an actively malicious IT person would not be deterred.
Yes limited protection against insiders is good defense in depth but not the primary purpose which is to protect end user accounts on other services in the event that you are breached.
> This seems to mostly prevent accidental logging
Yes, and that's not uncommon, IME. There's generally a lot of logging that's at least potentially available, and it gets turned on, and the logs shared when there's a problem that needs to be fixed (especially when it needs to be fixed quickly, which is usual).
This is going to make more sense for "enterprise"-type deployments, where there's a significant distinction between the people who might have access to request logs at times, and the people who can push code to production.