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Howitzer On The Hill

Government: INSURANCE


Racing last month through the underground passages that connect the Capitol to its neighboring office buildings, stopping occasionally to slap a representative's back or plot strategy, Paul A. Equale was in paradise. The chief lobbyist for the Independent Insurance Agents of America was storming Capitol Hill, leading an army of IIAA troops during the group's annual legislative conference. "I like lobbying with 700 of my members in town," Equale said between pep talks to his troops. "It's like walking down the beach with a howitzer."

Such bravado is vintage Equale. Leading one of the most influential grass-roots lobbying machines in Washington, the 44-year-old lawyer from Queens, N.Y., relishes his image as the quintessential Beltway insider. A "schmoozer extraordinaire" as one staffer describes him, Equale is a fixture on the Hill, spending much of his day walking the halls, buttonholing members to push agent-friendly legislation. He works out at the Washington Sports Club on Capitol Hill, the better to be closer to legislative aides. He even held the reception for his second marriage at the Rayburn House Office Building.

But the IIAA's clout and Equale's political connections face a huge test. The issue: the long running battle by independent agents to halt the advance of bankers into insurance sales. On May 10, the House Banking Committee approved an overhaul of the Depression-era Glass-Steagall Act, which separates banking and securities activities. While the act does not explicitly address insurance, the IIAA has in years past tried to attach language to such bills to restrict bank insurance sales. Rallying its 300,000 members behind such a move, Equale's group has usually smothered banking legislation before it emerged from the panoply of congressional panels that must approve changes in banking laws. But 1995 could be different.

Because bankers continue to make inroads into insurance through regulatory loopholes and court victories, this time simply killing legislative bank reform won't be enough. In January, national banks' ability to sell annuities was upheld by the Supreme Court--a battlefield where the agents' political clout is worth little. And under a loophole, the Office of the Comptroller of the Currency has allowed banks since 1984 to sell insurance from towns with fewer than 5,000 people--encouraging giant banks to set up shop in those tiny burgs from which they sell insurance.

This new world order has handed the usually uncompromising Equale, an outspoken Democrat, the unfamiliar task of trying to strike a deal in a GOP-led Congress before his agents lose any more bargaining power. "It's becoming tougher for agents to point to clear lines of demarcation [between] banking and sales of insurance," says Roger N. Levy, chief lobbyist for the Travelers Group. So restricting bank sales of insurance is "a tougher sell politically," Levy adds.

The IIAA has certainly been stung by bank competitors. In the mid-1980s the OCC allowed national banks to sell annuities. By 1993 banks had 32% of that $42 billion market, according to Michael White Associates, a consultancy in Radnor, Pa. Meanwhile, agents are also being squeezed as the number of insurance policies sold by mail or through insurers' own sales forces swells. The result: The nation's 40,000 independent agencies have seen margins decline 40% in five years, to about 15%.

That has sparked a lobbying frenzy among Equale's members. A database at the IIAA matches every member of Congress with agents in his or her district who can be called upon to sway them. Equale also enlists a handful of well-connected agents for a more personal approach. One such tactical trooper: Lewis Gray, a Mississippi insurance agent and former Navy flight instructor to Senator Tom Harkin (D-Iowa).

For more critical issues, Equale can tap the entire system in a move he fondly refers to as "carpet bombing"--marshaling every agent, through fax, newsletter, or phone, to push an issue with congressional members from their district. Such organization makes the IIAA a potent force. It also doesn't hurt that its political action committee doled out $1.1 million in campaign contributions between 1991 and 1994.

"They've been in my town meetings back home, in my offices in Washington, and in Baton Rouge," says Representative Richard H. Baker (R-La.) of the House Banking Committee. "They are one of the better organizations in getting their voice heard."

PEERAGE PRESSURE. The group's in-your-face style mimics its flamboyant lobbyist. No Ivy Leaguer--the son of a liquor store owner, Equale earned undergraduate and law degrees from the State University of New York at Buffalo--he still mixes easily with the Gucci loafer set and the legislators they lobby. Just look at Equale's trove of photos showing him shoulder to shoulder with assorted pols. "I'm like a peer," Democrat Equale boasts of his Hill ties.

But peerage may not count when a new bloodline takes the throne. That's why much of IIAA's intelligence now flows through Equale's deputy, Republican Robert A. Rusbuldt. Rusbuldt lacks his boss's flash but can get a personal meeting with House Speaker Newt Gingrich (R-Ga.) and attends Commerce Committee meetings devoted to crafting a deal between bank and insurance interests.

Still, IIAA ruffles feathers when it has to. In May, House Banking Committee Chairman Jim Leach (R-Iowa) angrily contended Equale reneged on a promise to remain neutral to the chairman's bank reform bill. The spat has been resolved, but Equale says such tiffs are inevitable. "It's a little like hockey: If you play the game long enough, you have a few teeth knocked out," he explains.

He could lose a few more in the weeks ahead as banks and agents try to hammer out a deal. But without a cease-fire, the IIAA's troops could suffer greater casualties at the hands of the courts and regulators. So a compromise doesn't sound so bad right now--even for a guy armed with a howitzer.

Equale's Agenda

The Independent Insurance Agents of America (IIAA) wants bank reform to include:

STATE REGULATION Agents say putting states in charge of bank insurance activities would create a level playing field. But it also would keep banks out of the insurance business in at least 12 states.

SALES RESTRICTIONS Agents cite the need to protect consumers from possible abuses by banks, such as tying loan approval to the sale of insurance products.

COMPTROLLER CURBS Agents argue that big banks are exploiting a legal loophole allowing them to sell insurance nationally from small-town branches. They want Congress to curb further expansion of bank powers by the Comptroller of the Currency.

DATA: IIAABy Amy Barrett in Washington

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