If you want it to work you need to hold off on holding your shield out until you think they will shoot. If you hold it out constantly then they aim for a limb. You gotta trick them into feeling secure with a body shot.
oh, and I am being serious. They will really aim for a limb if they can or need to. It is best to wait until you really need to block arrows.
This: Timed blocking applies to more than just melee combat.
Also, if you push the block button just before impact, you will automatically interpose the shield between yourself and the arrow.
Deflect Arrows means the arrows that do hit your shield do absolutely NO damage, instead of the 25-50% damage blocked attacks normally do. The perk's ultimately only useful to access the "Chargin' Targe" line up the Block tree.