Fictitious Grouping Law (FGL) — a fictitious grouping law prohibits the making of groups solely for the purpose of purchasing insurance. FGLs prohibit or limit the sale of insurance to groups that do not have an official or legal status as a group. Many states have statutes dealing with "unfair practices" in the sale or purchase of insurance. Among other issues, these laws place limitations on the sale of insurance to groups without common ownership or a common group interest or purpose.

Because a wrap-up insurance program entails the purchase of insurance by one entity for many separate and distinct entities, fictitious grouping laws can limit, preclude, or restrict the use of wrap-ups in a particular jurisdiction. These types of restrictions generally appear either in the unfair practices section of the jurisdiction's insurance statutes or in a section of the statutes called "fictitious grouping" laws. See, for example, Idaho Code Sect. Section 41–1317.

FICTITIOUS GROUPS

(1) No insurer, whether an authorized insurer or an unauthorized insurer, shall make available through any rating plan or form, property, casualty or surety insurance to any firm, corporation, or association of individuals, any preferred rate or premium based upon any fictitious grouping of such firm, corporation, or individuals. For the purposes of this section a "fictitious" group is one in which members of such group do not have a common insurable interest as to the subject of the insurance and the risk or risks insured or to be insured….