The D.C. Department of Insurance said yesterday that a rate increase by the Government Employees Insurance Co. that raises the cost of an average autombile premium in the District by $24 was "excessive" and ordered the company to reduce it by more than half.

Geico officials immediately labeled the action as "regulatory interference in the marketplace" and said they would appeal the order to the courts.

For a D.C. resident covered by Geico, the average cost of insuring a car for comprehensive, collision and property damage liability would increase from $346 to $370, under the rate increase implemented Sept. 6. But under the order issued yesterday, Acting Insurance Superintendent James R. Montgomery said the increase will be only $10.72, pushing the annual policy rate to $356.72. Geico officials, however, disputed that figure and said Montgomery's order will allow an increase of only $7.25.

The insurance department order won't help motorists who purchased Geico policies between Sept. 6 and Nov. 1, when Montgomery's rate reduction order takes effect.

"There's nothing I can do for them," Montgomery said. He said the law does not permit him to order refunds to policyholders who paid the full rate increase rather than the lower amount authorized by his department.

Geico is the District's largest insurer, with 35,156 policies, one quarter of the city's auto insurance market.

At the time the rates were raised, O.M. (Tony) Nicely, Geico's regional vice president, said an increase was needed because of a rise in accidents and in theft claims.

But in yesterday's order Montgomery said the company had changed its formula for computing rates, so that they are higher than they should be.

Nicely denied that the formula had been changed. "We haven't changed the method; we changed one of the factors in the formula ," he said.

A second reason for lowering rates, according to Montgomery, was what he said was the company's failure to count its income from investments in with its income from premiums. "Investment income must be considered as part of the company's income," he said.

Nicely said Geico investment income had been taken into account in justifying the new higher rates.

Montgomery also said that Geico's actions in implementing the September rate increase represented a "radical departure" from the way the company had handled rate increases in the past.

He said the company hand-delivered the notice of its intention on Friday, Sept. 3, to raise rates the following Monday, Sept. 6. That was in sharp contrast to the procedure the company followed in 1981 when officials filed notice of their intentions in October to raise rates and ultimately raised them in December.

He said Geico may have been rushing to put the increase into effect before the District's insurance law changed on Sept. 18. Until that date, companies seeking to raise rates filed notice of their intention to do so and immediately implemented the new rates. It was then up to the insurance department to review the new rates and determine if they were excessive or unduly discriminatory.

If Geico had waited until after Sept. 18, when the new law took effect, the company couldn't have imposed the higher rates until after the insurance department approved them.

Geico officials said the new law was not a factor in the timing of the rate increase. "We couldn't afford to wait any longer," Nicely said