Certainly God could annihilate individuals should he have chosen to do so. But he gave humans immortal souls that survive the separation of body and soul, which is what death is.
Hell was not created by God. Hell was created when angels freely chose to eternally separate themselves from God. Because angels and human beings were given free will, God allowed for the possibility of hell, but he did not directly create it.
Hell is the eternal separation of creatures from their Creator. The angels who fell did this by one irrevocable choice. Humans’ choice for heaven or hell is settled irrevocably at their deaths. The punishments of hell are entirely self-inflicted, so we cannot say that hell is an “external motivation” created by God to inspire humans to be good. At most, God may allow human fear of hell to work as such an “external motivator.”
Some Christians, such as Seventh-day Adventists, think that it is unmerciful for a loving God to torture fallen humans for all eternity and so they imagine it more in keeping with God’s loving nature for him to annihilate unrepentant evildoers. They are right that a loving God does not eternally torture people, but they are wrong in their understanding of the nature of hell.