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By B.G. YOVOVICH, who has written for national trade publications for more than 20 years

When planes piloted by terrorists slammed into the World Trade Center and the Pentagon on Sept. 11, 2001, the impact reached across the continent to touch the career of George R. Fay, who was executive vice president and chief services officer at The Chubb Corp. at the time.

Fay served four years of active duty in military intelligence and the Army in the early 1970s. Then he spent nearly 30 years rising through the ranks of reserve military intelligence specialists while at Chubb. After Sept. 11, his next four years were spent in uniform.

He received his second star in 2003 and transferred to the Pentagon to serve as the Army's deputy chief of staff for intelligence--the second-highest ranking uniformed official in U.S. military intelligence.

From April to September 2004, he served as the Army's chief investigating officer into the military intelligence involvement in the detainee abuses at Abu Ghraib Prison in Iraq. He was the lead author of the report based on that investigation, which is commonly known as the Fay Report.

After leaving active duty in 2006, Fay joined CNA with responsibility for claim strategies and operations for company's property/casualty operations worldwide.

In a recent interview in his office on the 39th floor of CNA Financial Corp.'s headquarters overlooking Chicago's Grant Park lakefront, Fay talked with Risk & Insurance® about insights gained and lessons learned from his military career that he's now putting to work at CNA.

"After I was mobilized on Sept. 11, I was the deputy commanding general of the Army Intelligence and Security Command, which is the operational level command for all (Army) military intelligence units worldwide," Fay said. "I have seen and have worked on some real Star Wars-type stuff--mind-boggling stuff, most of which is not classified."

For instance, "I worked directly on the challenges of detecting and targeting terrorist cells, for which we used data mining and predictive analysis," Fay said.

The same phone monitoring tools that enabled the military to identify terrorist cells and networks are being adapted to combat insurance fraud.

"Insurance fraud is huge," Fay said. "One-off claim fraud where an individual tries to defraud the insurance company definitely is there, but there also are a lot of collusive, criminal enterprises out there stealing hundreds of millions of dollars."

Enter the special analysis computer software from the i2 Group. "It is the same link-analysis tool that military intelligence analysts use on active duty," he said. The software links similar events and telephone numbers and does pattern analysis.

"We have been able to feed in the data, produce the graphic depictions and take them to law enforcement and get their attention. That is a big win, because it is nearly impossible to get law enforcement's attention on a fraudulent claim."

And, even without the law enforcement involvement, the identification of the fraudulent actors means that "we can enter them into our system and block any further payments to them," he said.

"There are huge capabilities here that we are going to use at CNA," Fay said. "And the National Insurance Crime Bureau has these tools now. They actually hired people from the National Security Agency, and the National Insurance Crime Bureau is doing some really nifty things on using electronics to fight insurance crime."

KEY LESSON ABOUT LEARNING

Another military lesson that Fay is applying at CNA is the importance of learning. "Peter Senge is the guru of adult learning, and he uses the U.S. Army as the epitome of an organization that is committed to lifelong learning," Fay said

Fay began to implement a greater emphasis on training almost as soon as he arrived at CNA.

"When I came to CNA four years ago, the claims organization had some people that had been at CNA for quite a number of years, but also a whole lot of people that had been hired from a bunch of other places--Travelers, Chubb, Zurich. We established the certification program, which is a test that we developed based on the CNA way," Fay said. "You might have learned how to reserve cases at Travelers or wherever, but this is the way that CNA reserves a medical-only case or a slip-and-fall case.

"We put everyone through training prior to giving them the certification test. If they did not pass the test, they got remedial training until they passed the test. It was a positive reinforcement thing, not a 'Pass the test or else.' Now, every adjuster--general liability, auto liability, property--all of them have gone through a certification program."

A colleague said Fay's commitment to excellence is inspiring to her.

"His vision is that we are going to be the best claim organization in the industry. Period," said Kathy Pagnano, a vice president and workers' compensation claims manager for CNA.

Having established a baseline of common practices, the training emphasis has been expanding into other areas.

"We are in the process of doing it for the more specialty lines practice--like medical malpractice, D&O liability, accountants liability," Fay said. "We do not have all of the certifications done for everything, but that is where we are going. Beyond the basic training, we also have advanced training. Once they have mastered the basics of workers' compensation, we have advanced medical training. Advanced product liability classes."

Fay insists that it is increasingly important for individuals to take charge of their training.

"It's what you need to do from the day you graduate from high school or college--you have to commit yourself to lifelong learning," Fay said.

THE TRAINING OF COURAGE

Fay's investigation of events at Abu Ghraib also has strengthened his conviction of the need for the training of "moral courage."

"The folks who were involved in Abu Ghraib were physically courageous people. They had been through a lot and had shown a lot of bravery in action. What they lacked was moral courage, the ability stand up and say 'That's wrong. You are not supposed to be doing that. Knock it off. And if you don't knock it off, we are going to do something about that right now.' "

Part of the response to Abu Ghraib has been a greater emphasis on training that makes use of real-world scenarios.

"I am not sure if there is a way to develop physical courage, but moral courage is something that absolutely is trainable," Fay said. "After Abu Ghraib, the Army started a heavy emphasis on putting people through rigorous real-world scenarios involving interrogation. 'What do you do now? How far can you go?'"

There is a clear business connection, according to another CNA executive.

"Maybe it's the military, maybe it's not," said Michael Stapleton, a senior vice president in claims administration for CNA. "But to me, leadership is more about the personal attributes and George has a lot of attributes that I try to carry," Stapleton said.

These real-world scenarios that Fay supports can be crucial in deepening a text-book understanding of ethics.

"You do not get through MI (military intelligence) or MP (military police) school without knowing the Geneva Convention. They all passed the Geneva Convention test, but they did not apply what they had learned to the real world," Fay said.

The need for moral and ethical strength is also important on the civilian side, he said.

"Everyone has that responsibility, in the military and in civilian life. If you see something is wrong, it is your personal responsibility. You cannot delegate that to anybody else. You have got the responsibility to stand up and say 'That's wrong. I am not doing that. That is a violation of law or ethics and we are not going there.' "

CNA already had been making use of scenario-based ethical training before Fay joined the company.

"We have them online. They were developed before I got here, and they are very good," Fay said.

And Fay isn't above them.

"Everyone has to take them in the first month after they come to CNA, and I had to do that, too, when I first came here," he said, with a smile.

November 1, 2010

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