I think this is a bit of a grey area. As Lexoncd says for a package they can insist you have insurance and this is understandable. As for flight only there is specific EU legislation which prevents airlines forcing customers to buy additional services, like insurance, through them.
As for an airline insisting on it's customers having medical and evacuation insurance I think that's a very grey area, there are a whole range of reasons why an airline can decline your business if it so chooses. Also, there are various countries which insist you must have medical insurance to enter, like the Russian Federation for example.
Personally speaking I think you might find that this particular problem may be more connected to the software that you travel agent is using, ie it's the same as the package tour software and requires the box regarding insurance to be ticked. If Thomas Cook were insisting on insurance with every flight booking we'd have heard about it before.