A customer believes an agent can alter their policy based on past interactions. This is an example of what kind of authority?

The situation described illustrates the concept of apparent authority. Apparent authority arises when a third party perceives that an agent has the authority to act on behalf of another party, even if that authority was not explicitly granted. In this case, the customer believes that the agent has the ability to alter their policy based on past interactions. This belief creates a scenario where the agent appears to possess authority in the eyes of the customer, leading them to trust that adjustments can be made.

This notion is crucial in the insurance industry, as it underscores the importance of clear communication regarding the scope of an agent's authority. If a customer mistakenly assumes an agent can alter policies due to prior dealings, it may lead to misunderstandings or disputes if the agent is not explicitly empowered to make such changes. Understanding apparent authority helps agents navigate customer relations and manage expectations effectively.