Why a thermoelectric generator's efficiency increases when the thermal conductivity of thermoelectric materials decreases?
Thermoelectric generators (TEGs) convert heat energy to electrical energy. They rely on a temperature difference between the hot and cold junctions : that temperature difference creates a voltage difference between the two junctions, and it is that voltage difference that allows you to extract energy.

However the hot and cold junctions are connected by the TEG itself, which conducts heat energy from the hot to the cold junction. This conducted heat bypasses the energy conversion process and is a pure waste of energy. So the higher the thermal conductivity of your TEG, the more energy it wastes ... and so, the less efficient it is.