I'm not familiar enough with Iceland to argue the point.
I assume however that the real objection is to taxes, which really become a kind of payment for protection.
Not just to taxes. It's the lack of choice. Sure, as you said, most people are going to need protection. But that doesn't mean that one organization can claim a monopoly on force and forbid any other protection organizations from competing. Just because most of us need to purchase food doesn't mean Kroger can come along and force us to buy from them, and not from Publix.
And the thing is, if it was just protection, then people like me probably wouldn't complain all that much. But it's not just protection. It inevitably turns into a vast regulatory regime, paternalistic mandates like Social Security and the War on Drugs, not to mention all of the other countless tax dollars wasted on pork each year, as embodied in the present day welfare state. None of this could conceivably be justified under the argument that we would have to purchase these services for ourselves anyway.
Like it or not you need laws.
You certainly do. But laws are not the same thing as government. The two are independent of each other.
