Hi all,
I've been researching this issue ever since getting my hands on my iPhone 13 Pro Max and comparing it with my 1st gen iPhone SE. I think the issue is the auto HDR being applied here which is forced when you shoot with the Stock Camera App (option to disable this has been removed in iOS 15 for iPhone 13 series).
I believe I have found a workaround for now that might prove this is a bug. If you take a Live Photo, the processing is applied only to the Main Key Frame. If you edit the image and choose a slightly shifted key frame, you will see that the processing does not apply to it. The main key frame is marked, and the processing will resume if you revert back to it, but so far this is my workaround to keep both the Live Photo feature with the desirable image output, as well as retain small JPG file sizes.
Hope that helps someone looking to shoot JPG only, like me.
Sample attached, shot on wide camera at 2.7/2.8x zoom to replicate the watercolour effect. Left side is the default photo, right side is with key frame shifted only.