Probably works in rural areas. A friend of mine addressed a postcard to "the red house by the lake" in a small Norwegian town, and they were able to deliver it. Other people I know in Norway didn't have street names until there was a big push for naming all the streets around 2015 or so. Prior to that they just used the name of the farm or skipped it entirely if their last name matched the farm.
None of these examples were from Iceland, but considering Iceland is even less populated than Norway, it seems plausible that drawing a map could work.