Beyond Objective Coverage: Perceived Protection and Moral Hazard: An Integrative Narrative Review

Moral hazard is one of the most fundamental concepts in agency theory and the economics of asymmetric information, yet the literature on it is scattered across research traditions that rarely intersect. Some studies are inductive and contextual, examining the causes and mitigation strategies of moral hazard separately in fields such as banking, deposit insurance, health, agriculture and corporate governance. Others are deductive and measurement-oriented, beginning from classical agency-theory constructs to build quantitative proxies that are comparable across sectors. This article provides an integrated literature review that surveys and synthesizes findings from both traditions, with a specific focus on recent empirical evidence (2024–2026) across five sectors: banking, deposit insurance, health, agriculture and environmental governance. The review distinguishes objective coverage, understood as observable features of a protection or insurance arrangement, from perceived protection, understood as the agent’s subjective assessment of the extent to which adverse consequences are likely to be absorbed by another party. These constructs are conceptually related but should not be treated as equivalent. The review finds that although the contextual causes of moral hazard vary by sector, one common theme consistently emerges from the literature: the behavioural effect of a protection mechanism cannot be understood solely from its objective coverage, as governance, payout design, premium structure, external oversight and agent characteristics may influence how protection is translated into behavioural responses. However, the reviewed studies do not directly establish perceived protection as a mediator between objective coverage and moral-hazard behaviour. Instead, perceived protection is identified as a potentially important explanatory construct and research gap requiring direct empirical measurement and appropriate research designs. This article also discusses policy and practical implications, the limitations of existing studies and proposes a future research agenda for empirically examining the role of perceived protection in moral-hazard behaviour.

moral hazard; agency theory; literature review

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