Well the thing its like a distraction while another member goes about the looting, not necessarily from the NPC. And in my testing of this, the NPC has broken off the conversation and caught the thief as well. So it might be an element build into the game
Ah, I'm only familiar with it from the first game where you'd initiate conversation and the NPC would become completely oblivious to absolutely everything else, so you could take everything in the vicinity and they wouldn't notice.
