In some cases, insurance companies may offer a settlement before trial. Sometimes, in an effort to resolve the case, as an incentive they will offer an amount of money that is acceptable to the injured victim. But, in some instances, the insurance company wants an assurance that the terms of the settlement are not revealed.
They do this for two reasons. Neither one of which is out of the goodness of their heart. The first reason is that they don't want publicity associated with a settlement. Publicity about an insurance company paying money to an injured victim is never good for them especially since they earn their money by KEEPING their money, not giving it away.
Second, is that other attorneys with similar cases will never learn that the insurance company paid out a certain amount is a specific type of case. So, when the next lawyer tries to negotiate a case with the insurance company, he or she won't be able to say "You paid 'x' dollars on the Jones case, so therefore you have to pay at least that amount on this case."
Sometimes, the only way an insurance company will offer such a settlement is on the condition that the terms of the agreement be confidential. Otherwise, there might be no settlement, and the case would proceed to trial.
A client might be willing to agree to this restriction if it were in their best interests. Some clients want to publicize the damage and injuries they suffered as well as any compensation they received for their injuries. In that instance a confidential settlement agreement would not be advisable.