In moisture separator is left un-insulated, it could induce water droplets to be formed rather than remove it. For this reason, moisture separators should be insulated.
Moisture in steam blocks heat transfer. Additionally it also erodes the pipes and pipe accessories. It is for this reason that a device called as a moisture separator is used to separate the water droplets from steam flow.
The moisture separator consists of baffles. The water droplets in steam collide with these baffles and are then drained off thereby ensuring their separation from steam. When the moisture separator is left un-insulated, the increased surface area provided by the baffles acts to condense steam in a manner to condense steam thereby increasing the moisture content.
Therefore it is recommended to insulate the moisture separators. This ensures that they only separate the water droplets already existing in steam flow.