It's not. Here's what I see if I go to book a flight on Icelandair's website:
The premium cabin is sold as "Saga Premium," as also shown on their services page. Their fleet pages depict "Saga Premium" and "Economy" classes, not business. Which strikes me as fair. It's clearly a premium service as compared to economy, even if there aren't all the benefits ...
This page sets out the different fare classes.
The difference between economy flex and saga premium:
Free alcoholic beverages
Free hot towels
2 32 KG checked baggage vs 1 23 KG checked baggage
2 - 2 vs 3 - 3 seating
3400 miles points for flights within Europe vs 2550