If they did support keeping the history but only using it for you, it would be even harder for them to credibly prove that they are not keeping the history for advertisement purposes ("I have disabled you keeping any location history and still you list the places I have been to? How dare you??").

I can understand your point about allo more, though of course storing the local history unencrypted also means that it's going to be accessible to interested third parties in one way or another. If they don't keep it at all, it means that it won't be.