Early Detection of High-Risk Claims at the Workers' Compensation Board of British Columbia

Ernest Urbanovich (), Ella E. Young (), Martin L. Puterman () and Sidney O. Fattedad ()
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Ernest Urbanovich: The Workers' Compensation Board of British Columbia, PO Box 5350, Station Terminal, Vancouver, British Columbia, Canada V6B 5L5
Ella E. Young: Marsh Canada Limited, 1300-510 Burrard Street, Vancouver, British Columbia, Canada V6C 3J2
Martin L. Puterman: Faculty of Commerce and Business Administration, University of British Columbia, 2053 Main Mall, Vancouver, British Columbia, Canada V6T 1Z2
Sidney O. Fattedad: The Workers' Compensation Board of British Columbia, PO Box 5350, Station Terminal, Vancouver, British Columbia, Canada V6B 5L5

Interfaces, 2003, vol. 33, issue 4, 15-26

Abstract: We developed a combined decision-analysis and logistic-regression approach for identifying high-risk claims at the Workers' Compensation Board of British Columbia (WCB). The early detection of such claims and subsequent intervention is likely to reduce their eventual cost and to speed up worker rehabilitation. High-risk claims are extremely costly to the WCB; for the approximately 321,000 short-term disability claims with injury dates between 1989 and 1992, high-risk claims accounted for $1.2 billion (64 percent) of the total payment of $1.8 billion, even though they constituted only 4.2 percent of the claims. We developed separate logistic regression models for each injury type. We found that the age of worker and number of workdays lost were predictive of high-risk status. We used decision analysis to develop a classification rule that has high out-of-sample predictive power. The WCB has incorporated these results in a claims-profiling scorecard, which identifies claims needing early intervention. We estimate that our method saves the WCB $4.7 million annually.

Keywords: Decision; analysis:; applications.; Financial; institutions:; insurance. (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (1)

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