From what I'm remembering, Karmic Dice doesn't affect the # of critical fails. Out of 735 Karmic Dice rolls, a 1 was rolled exactly 5% of the time. I think this is because, in BG3's code, a natural 1 supersedes everything and thus prevents the Karmic Dice correction from happening.
Ah, I see. The ingame desciption only says "Karmic dice avoid failure streaks, while keeping the results mostly random."
I thought it would apply to nat 1's as well since we usually have proficiencies and bonuses to deal with low rolls but nat 1s is automatic fail.
If it doesn't affect nat 1's then it just becomes even worse if enemies benefits from karmic dice.
I'm gonna keep it off for now.
