Sam I think you're right.
The way my original cable frayed, it look like it was "cut" at the neck of the metal clamp. So the plastic piece probably prevents that kind of chaffing.
Originally I took the plastic piece off because on the old cable I did not see a plastic piece on there. I wish the service manual specified about leaving that piece on.
Oh well, nothing I can do about right now, but I am glad I know now.