Potentially unusual LED failure
It seems that circuit is originally just meant for a neon bulb, and the manufacturer has simply replaced the neon bulb with a LED.
In that circuit, there is no protection for the LED from reverse voltage being applied over it. LEDs typically have a reverse voltage limit of 5V.
So it will work with AC circuit like that for some time, but the LED degrades faster than in a proper circuit where the reverse voltage is prevented with another LED or diode.