2nd level header is numbered as a 3rd level header.

You could use one of the built-in list styles in the Home>Paragraph>Multilevel List dropdown.

To create a custom list style, please see Shauna Kelly's page: How to create numbered headings or outline numbering in Word

John and Stefan have already linked you to Shauna Kelly's page. It is important enough that here is a third time: https://www.shaunakelly.com/word/numbering/numbering20072010.html

You need to go to the first instance of your level one numbering and, when in that paragraph, open the Define New Multilevel List dialog. Note that this will be under the multilevel list icon, not the list icon that seems to be active.

If you need more, here is a link to my pdf on AutoMatic numbering in Word that has more instructions and links to other resources including videos: https://www.addbalance.com/usersguide/AutomaticNumbering.pdf.

The multilevel list is damaged or it wasn't set up properly to begin with. To fix it, click in the very first Heading 1 paragraph of the affected document. On the Home tab, click Multilevel List and then click Define New Multilevel List. Verify all aspects of numbering, for each level. John has already directed you to the most important resource for the dialog box: https://shaunakelly.com/word/numbering/numbering20072010.html .