We used the insert with my daughter until she was nearly 4 months old. The purpose of the insert is to support the hips in a "frog" position for proper hip development. If your baby's legs are dangling out of the carrier (like Baby Bjorn) it can affect the lower back (sacrum) and hip development. I posted a PDF file awhile back about this--I think I can repost it sometime. We only stopped using the insert because my daughter is really tall and she wouldn't fit inside the carrier anymore with the use of the insert.
There are mixed reviews/messages about what is okay/not okay as far as carrying babies after birth. I've even read articles where doctors strongly advise against anything except carrying the baby in arms at all times (no strollers, no slings, nothing...) with evidence for these claims.
For me, it's a matter of practicality. I don't think it's safe for me to be carrying the baby in-arms because in HK people don't watch out for you and bump into you and you could easily drop the baby. Strollers are bulky and cumbersome (where we live, at least) and if you leave your child in them (or car seat carriers) for longer periods of time they can develop a flat skull (this accidentily happened to my son a bit--and it was only caused by one long road trip of a few days where he spent a lot of time in the carrier--when he was about 4 weeks-old).
Slings and carriers that have the baby lying flat never worked for me so I think the Ergo is a good compromise. In cultures around the world babies are often worn nearly 24 hours/day without major adverse effects (not always but most of the time). I think it greatly depends on how well the hips and sacrum are supported.
Some children even need to sleep almost in an upright position due to colic or acid reflux (my daughter had neither but slept a lot better on an incline) so...I think you kind of weigh the "risks" but I've never heard of or read of major damage to a baby being carried in an upright position after birth.
But...also should add that my daughter was 8 pounds, 6 ounces and my son was 8 pounds, 1 ounce when they were born and both had great head and neck control--both could hold their heads up at birth so they had a lot of strength in their bodies and weren't particularly "fagile" so....