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

Apparent authority refers to a situation where a third party believes that an agent has the authority to act on behalf of a principal based on the principal's representations, actions, or behavior. In this case, the customer perceives that the agent can make alterations to their policy because of previous interactions or the way the agent has presented themselves. This belief can arise even if the agent does not have explicit permission or authority from the principal (in this case, the insurance company) to perform such actions.

This concept is vital in agency relationships, as it ensures that agents represent themselves accurately and that the principal is held accountable for the appearances that might lead third parties to assume agents have certain powers. Understanding apparent authority is crucial for maintaining trust and managing customer expectations in insurance transactions.