Fred Rockwood, president and chief executive of Hillenbrand Industries Inc., is no stranger to the Batesville, Ind. holding company's ability to build niche businesses.

        Mr. Rockwood, who joined Hillenbrand as director of corporate strategy in 1977, is the architect of the company's most successful niche business, Forethought Financial Services, the leader in funeral planning insurance with more than $3 billion insurance in force.

        Mr. Rockwood, who was named Hillenbrand chief executive late last year, said Forethought began in the early 1980s when Batesville Casket Co. noticed an increasing interest in pre-arranged funerals.

        “We wanted to know whether this was a positive or negative for Batesville Casket,” he said. “We discovered not only was it a positive thing, it really filled an unmet need.”

        While some funeral directors created pre-need trusts for customers who wanted to set aside funds for their funerals, most funeral homes didn't want to be in the financing business.

        “We found a way to protect the price of the entire funeral, not just the casket,” Mr. Rockwood said. “That required application of an insurance technology, but we didn't know anything about insurance.”

        And Mr. Rockwood found little interest among existing insurance companies for writing coverage in small policies of $4,000 or $5,000, each of which would be paid out in a matter of few years.

        One day Mr. Rockwood was having breakfast with Dan Hillenbrand, then the parent company's chief executive and now its chairman emeritus.

        “I was telling him my problem finding an insurance company interested in the idea, and he said: "Well, why don't we create our own?'

        “I said, "I don't known anything about insurance.'

        “And he said, "You're a smart guy. You can figure it out.'”

        With Mr. Hillenbrand's support, the company chartered a small life insurance company in Arizona in 1985.

        “We showed 30 Phoenix funeral directors what we wanted to do, and I think 29 signed up the first day,” he said.

        Today Forethought has more than 1.4 million policyholders.

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