Police have listed 77 law firms allegedly used by the tourists to file their complaints as part of their investigation, a statement said.
The law firms "orchestrated a possible criminal network based on fake claims that have generated significant economic damage to the Balearic and Spanish tourism sector," it added.
The Balearic Islands -- which include Ibiza, Mallorca and Menorca -- saw a 700 percent rise in sickness claims from January 2016 until the end of September, with the overall cost of the claims worth four million pounds (4.5 million euros), police said.
Hotels complain that British claims management companies openly tout for business in Spanish resorts, promising not to charge any fees if no eventual damages are paid out.
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An ambulance emblazoned with the words "Claims Clinic" was last year pictured driving around Tenerife on Spain's Canary Islands, where more than one in three tourists is British.
Spanish tourism officials say the problem has arisen because British consumer law does not require claimants to produce any medical evidence of illness, and claims can be filed up to three years after a stay at a hotel.
The number of British tourists visiting Spain jumped by over 12 per cent in 2016 to hit a record 17.8 million.
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