Final answer:
The marketing practice involving force, fright, or threat to sell insurance is coercive marketing. It is contrasted with government interventions in insurance markets that require insurance purchase to prevent adverse selection and create market stability.
Step-by-step explanation:
The method of marketing that has the effect of inducing the purchase of insurance through force, fright, or threat is known as coercive marketing. This practice is generally considered unethical and in many cases, is illegal.
In the context of insurance markets, government intervention often requires individuals to purchase insurance to mitigate the risk related to adverse selection, where only high-risk individuals choose to buy insurance, leading to increased costs.
Government requirements for car owners to buy auto insurance or homeowners to have homeowner's insurance are examples of such interventions.
These requirements provide a more stable insurance market by ensuring that the risk is spread across a broader population, including those with low risk, who might otherwise choose not to purchase insurance. Nevertheless, insurance companies may still attempt to limit their sales to high-risk individuals to keep prices manageable.