That is all terrible to hear. There has been somewhat of a Wild West in the tourism industry here, but I have not heard of many drivers who are that cavalier. I have no doubt that they exist, though I hope things have gotten slightly better in the last few years. I am not sure how to find a better driver, other than to ask around. I have a friend I can direct you towards, but she is not always available, of course.
The accident you were referring to did not have a local driver...at least not as far as I have seen in the Icelandic media, which has identified them a family of seven British/Indian citizens all residing in the UK who crashed as they were approaching a one lane bridge. The cause is as of yet unclear, as the weather was not bad and there was no ice on the bridge.
https://grapevine.is/news/2018/12/27/questions-raised-about-fatal-traffic-accident-in-iceland-today/
Driving in Iceland in the winter can be dangerous, as it is not possible to maintain the whole road network with such huge distances and so few settlements. Locals tend to be more familiar with the conditions and also less likely to travel in bad conditions. Tourists come for a once in a lifetime trip and forge ahead regardless of the weather. They also have behaviors that cause problems at times. Last year a few people died because a rental car made a sudden stop in icy conditions to turn in to a tourist overlook, and a bus that was behind it could not stop in time and slid off the road. Icelandic bus drivers are also under a lot of stress to take people out on tours regardless of conditions (see above), which has created problems. The road administration used to be fairly cavalier about road closings, since before the tourism boom most people on the roads were locals who tended to know what was doable. The fact remains that this is still a rugged an empty country in many places, and it makes no sense to close a road because someone in a small rental car might have trouble, when most of the locals in those areas drive large trucks with huge, studded tires and have grown up in those conditions. These days, however, they are more likely to close the roads, and the weather administration has introduced a new colored weather warning system to help tourists understand the conditions (and I believe also help cover the tourist companies when they cancel plans). The whole thing is very complicated with no real answers. To cater the whole infrastructure of the country to tourism is undesirable and has a negative impact on locals, while leaving everything unregulated endangers the uninformed, tourists, the unlucky and the reckless.