"It was a monetary decision. And we don't discuss personal monetary decisions with family or close friends. Therefore, we also don't use family or close friends for financial matters, because they involve monetary decisions. We're sorry if you were offended, but that's our decision. It's not personal, but it IS our stance and our decision.
Now, are you going to continue to hold a grudge for a decision that had nothing to do with you, personally, or are you going to get past it so we can have pleasant holidays? Because this business of not talking to or even acknowledging one of us....not cool. So decide: are you going to be polite from this point forward, or will you be backing out of everything that involves us? And please be prepared to stand by your decision, because if anyone asks us about it, I won't hesitate to tell them the truth."
It could be viewed as somewhat of a threat, yes. But really, it's just forcing SIL to own her actions. If anyone asks you, you can tell people that SIL won't talk to you and has told you that she will no longer acknowledge you because you didn't use her for your insurance and you found another, better-priced, option. She can be mad all she wants, but she has to own that decision, and she has to live with the consequences.
And really, you should go off on her for her trying to bully you into using her business, at a personal financial loss to you, and then snubbing you when you didn't do it. Seriously? Is THAT how she behaves professionally? She wanted you to trust her professionally, and then she snubs you? I guess she showed you that you made the correct decision in NOT using her services.