You don't seem to understand what a 'service' is. In particular, you seem to think a service is something that operates on resources called 'instances'. Here's the Wikipedia definition of a web service:
> a server running on a computer device, listening for requests at a particular port over a network, serving web documents (HTML, JSON, XML, images), which serve in solving specific domain problems over the Web (WWW, Internet, HTTP)
Clearly IAM is a service.
Further, the service needn't operate on resources called "instances" in order to provide value--few AWS services offer "instance" resources and yet they deliver value to customers and are consequently priced. IAM isn't priced directly, but rather the operating cost for the service is built into other AWS services, presumably to encourage people towards security best-practices (charging for IAM might dissuade users from building securely).
