If a bank offers a loan only if the customer purchases a life insurance policy from them, this situation exemplifies what practice?

This scenario exemplifies coercion, which refers to the practice of forcing or manipulating someone into a specific action, in this case, requiring the purchase of a life insurance policy as a condition for loan approval. Coercion undermines the voluntary nature of financial transactions, as customers should have the freedom to choose whether or not to buy insurance from a specific provider, without it being tied to receiving a loan.

In financial regulations, such practices can be seen as exploitative, as they limit consumer choice and may create undue pressure on individuals to comply with the lender's demands. Coercion is particularly relevant in discussions about consumer protection, where regulations aim to prevent lenders from imposing unfair conditions on borrowers.

The other options—fair trade, bundling, and underwriting—each describe legitimate practices within financial services but do not accurately reflect the unethical implied pressure in this scenario. Fair trade refers to equitable practices in commerce, bundling involves offering multiple products together but typically does not involve coercion, and underwriting is the process by which a lender evaluates the risk of insuring a loan, which is not applicable in this context.