According to a new report that described ULIP or unit linked insurance plans as a `scam', these financial instruments duped customers for thousands of crores of rupees.

The report estimated that the ULIP scam was worth a whooping Rs. 1.56 lakh crore, causing huge losses to the investors in the country. It indicated that the losses faced by the retail investors in ULIPs have resulted in their reluctance to invest in real assets like gold and has impact market sentiment.

Data shows that the agency commissions were recorded at Rs 1.13 lakh crore between 2004 and 2012. The report claimed that about 72 per cent of the losses were paid by investors to agents as commissions during the period.

"The mis-selling of life insurance products in the decade after the 2000 privatization is a textbook case of poor regulation and mis-managing the transition from a state monopoly to free markets," it said.

The report also claimed that the Insurance companies and agents connived to mis-sell ULIPs to investors without much knowledge about financial instruments and to the urban rich. Agents aggressive mis-sold plans eyeing first-year commission and thus earning huge profits from the transactions.