The recommended way to mount a TO-220 package is to use a spring clip or bar pressing on the body of device. But the package was designed to be mounted using a bolt through the hole in the heatsink, and the manufacturers provide mounting instructions for doing so.
The mounting instructions frequently (Phillips, Alpha&Omega, Vishay, IR, Infineon, TI, ON semi etc) contain the suggestion that a rectangular washer be used, particularly when trying to mount fullpack (insulated) packages. For example, infineon, Mounting considerations for TO220 Full PAK.
... but the recomendation is as old as the package, and the same diagram seems to have been copied down from some ancient original source.
The main purpose of the washer is to protect the package: a secondary purpose is load spreading. This is not the insulated washer used for isolation beneath a standard TO-220 package.
Does anyone still use rectangular washers on TO220 packages? Does anyone supply TO-220 rectangular washers as a standard part? Have you ever seen a rectangular washer on the tab of a TO-220? If so, when?