Yes, moral hazard is an issue. But in general a 10% cut doesn't eliminate the incentive for people to work, and the legal system makes "disappearing" non-trivial. That's also why I've included the possibility of automatically skipping low-income years, and not counting them towards the 10 years; ie, it's not just the next 10 years but the next 10 reasonably-profitable years. Finally, a chunk of the risk can be managed by the investor by diversification across different individuals, industries, skill sets, etc. And the rest is risk premium, which would result in a higher average return than a simple loan.

I don't think the difference between a guaranteed annuity and a lump sum is the main blocker here, those tend to be relatively interchangeable (at the appropriate interest/return). The part I'm more interested in is the insurance aspect. As mentioned, disability insurance is a part of it, and an emergency fund is another part for short-term changes in income. But even with both of these in place, the remaining risk means that eg my effective buying/renting power for a house is significantly diminished.

Note that income share agreements already exist for student loans. They're not so widely used and have their own issues, but it's also a much harder market than people who are already confirmed to be able to take in high earnings.