I think it's a bit more nuanced than 'ego', Mach. I think it's more about being very protective of one's own aircraft and usually being very competent in its safe and efficient operation because of the time spent flying it, exclusively. That doesn't rule out the owner having bad habits that haven't killed them yet, of course. But it does not follow that instructors/FEs/ATOs are infallible. I gave a couple of real world examples above.
Let's see if we can agree on one thing: It is open to me, during an AFR, to terminate the review and take over as PIC from that point. I'm inside the previous AFR period and I've done at least 3 take offs and landing within the previous 90 days. There's no reg that I'm aware of that says I'm not allowed to fly as PIC with PAX in those circumstances. Are you? Nor am I aware of any reg that says the instructor/FE/ATO 'outranks' me in some way, such as to 'order' me not to be PIC. Are you? We're civvies in a civvy aircraft.
If I think there's a substantial risk that the person in the right hand seat is going to bend my aircraft or me, I'll be taking over.