At an organizational level, it's extremely hard to control what information get put into a SaaS. There are far too many ways in which data can be de-anonymized or inferred against (e.g. a field existing can have privacy implications).
It's far safer to use a SaaS provider that meets general control requirements than to try to shoe-horn encrypted data into them.
Classic example is on-prem enterprises requiring data encryption at rest when moving to a cloud vendor. I can explain to a client that encrypting an S3 bucket with an AWS-managed key doesn't really prevent anything beyond someone physically stealing a hard drive from the AWS data center, and that the cloud provider can still see all of their data because they control the encryption key... or I can just click the "encrypt data" flag on the S3 bucket, make their security and compliance officer happy, and be done with it.
So, you're totally right, but this might be a case they needed to satisfy where an enterprise security team or regulatory agency said that they couldn't put X data field in the cloud unless it was encrypted, but X data field was really important to the application team.
It does, though. To get that data, you now need access to the bucket itself _and_ the KMS-managed encryption key. You might not be protecting the data from AWS, but one bucket misconfiguration doesn't lead to wholesale data loss now.
Is it perfect? No. You can misconfigure both. But misconfiguring KMS access is harder to do.