Britain's biggest broker group Aon has forged an affinity link with telecommunications giant BT to provide household insurance to millions of telephone users.

The alliance will initially offer buildings and contents insurance to more than three million BT subscribers.

However, coverage is set to spread to both existing BT and non-BT customers as the project is rolled out across the UK in the coming months.

Telephone users who take out household insurance with Aon will receive a credit to set against their phone bill which will be worth up to ten per cent of the total premium payable.

The benefits of the policy include, legal expenses cover worth £25,000 and free access to a 24-hour legal problem helpline.

Aon claims its buying strength in the insurance market will allow it to offer very attractive premiums to prospective customers.

Peter Friend, chairman and managing director of Aon Personal Insurance, said: "When coupled with the BT telephone bill credit, the insurance offers real savings to many households while enhancing their overall protection."

He added: "We expect that a significant number of BT and non-BT customers will choose to move away from the more expensive policies offered by building societies and banks."

However, Halifax – one of the biggest providers of home insurance with 1.6 million policyholders – dismissed the threat presented by the affinity deal.

Simon Stevens, head of underwriting at Halifax, said: "I don't think it is a major concern for us. We have already seen British Gas and London Electricity offering their customers affinity deals incorporating discounts on their bills. But these have had only minimal impact on Halifax. Most of our competition comes from direct writers."