The Claims Management Regulator (CMR) found that Lancashire based Allsure encouraged holiday-goers to fabricate or embellish symptoms of gastric illness to get compensation.
It also used deceptive sales scripts – exaggerating expected pay-outs to entice consumers.
Licence cancellation means it can no longer offer regulated claims management services to new or existing clients, said the Ministry of Justice.
Allsure is based in Preston and has been operating in the personal injury claims sector since April 2014. The business can appeal the cancellation within 28 days.
Kevin Rousell, head of the CMR, said: “We will take firm action against claims businesses which engage in serious misconduct. Seeking to encourage false claims will not be tolerated.”
The action is part of a government to crackdown on fake sickness claims, following concerns from the travel industry of a surge in insurance claims for illnesses like food poisoning brought by British holidaymakers.
Ministers reduced cash incentives in bringing spurious claims against package holiday tour operators earlier this year.
David Burton, managing director of Blackfriars Group – an insurance broker, said while it is in the industry’s interests to see such a clampdown there was no shortage of people willing to go along with it.
“It is also worth pointing out that there was apparently no shortage of consumers who were prepared to go along with the plans in order to obtain compensation they were not entitled to; whether they were aware or not that they were engaged in an act of fraud,” he said.
“The seriousness of insurance fraud needs to be highlighted to the public, both the criminal nature of the activity and also the cost it inflicts on the broader society and law abiding policyholders.”