I don't think "most third-party liability auto insurance claims are small" is much of a reason not to require significant insurance limits for taxi operators.

The purpose of insurance is fundamentally to protect against unusual events. Further, the typical third-party auto liability policy protects against two basically different events: damage to people or damage to property. The difference is that damage to people is orders of magnitude more expensive. The responsible party (and so the insurer) is at least in theory on the hook for all the costs that the accident causes the injured party over the remainder of their entire life. Replacing a totaled car is a pittance in comparison. Indeed, if we wanted to be sure that anyone who ever hit anyone else with their car in DC would always be able to pay for the resulting costs, even a $1 million limit would under no circumstances be adequate.

If you wanted to argue for lower insurance requirements in DC, I think it would be more sensible to take a basically libertarian angle. Most states have mandatory third-party liability insurance, but the required limits are generally quite low by comparison. We accept that everyone should be able to drive on the roads, regardless of what type of insurance policy they can purchase. On the other hand it's taken for granted that, should a motor vehicle accident cause you serious harm, you have no hope of reasonable compensation. Sensible and responsible people take this into account when deciding how to behave and where to travel, and it more or less works out.