What is it called when a lender requires the applicant to purchase insurance from a specific insurer as a loan condition?

The situation described occurs when a lender imposes a requirement on a borrower to obtain insurance from a specific insurance company as a condition for approving a loan. This practice is known as coercion. It involves the lender exerting pressure on the borrower, which can lead to the borrower feeling obligated to comply with the requirement, even if they would prefer to choose a different insurer or find a better rate elsewhere.

The term "coercion" is particularly applicable in this context because it implies an element of force or pressure. While some of the other terms may relate to insurance or lending practices, coercion accurately captures the nature of the lender's action in mandating the use of a particular insurer. Recognizing this type of scenario is important for understanding ethical lending practices and consumer rights in the insurance and finance sectors.