The UK government-run Claims Management Regulator (CMR) discovered that Allsure Ltd had encouraged people to fabricate or embellish symptoms of food poisoning on fake insurance claims in order to claim compensation.
Intelligence gathered by the CMR, which is based at the UK's Ministry of Justice, also revealed that the Preston, Lancashire-based firm had used deceptive sales scripts – exaggerating expected pay-outs to entice consumers.
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This conduct has led to the firm's licence being cancelled, meaning that it can no longer offer regulated claims management services to new or existing clients.
The penalty should serve as a warning to unscrupulous insurance firms, many of whom have representatives touting for business in popular resorts across the Spanish coasts.
Kevin Rousell, Head of the Claims Management Regulator said: “We will take firm action against claims businesses which engage in serious misconduct. Seeking to encourage false claims will not be tolerated.”
CMR regulates companies that offer to help people claim compensation for issues such as personal injury and mis-sold financial products.
The action taken against Allsure Ltd is the latest in a series of moves by the government to crackdown on fake sickness claims, following concerns from the travel industry about a surge in insurance claims for gastric illnesses like food poisoning being brought by British holidaymakers.
In July, the UK government announced steps in the fight against fake food poisoning claims after uproar from Spanish tourism authorities, in part because of the “damage to the British reputation overseas.”
Justice Secretary David Lidington pledged to reduce the cash incentives to bring action against holiday firms.
Spain's hotel industry has also launched measures to protect themselves against fraudulent food poisoning claims that cost the industry more than €60 million last year alone.