I have an Apple Watch 4, and it used to unlock my 2014 27" iMac running 10.15.7, but no longer does. I’ve since disabled and re-enabled the option Security & Privacy, but that doesn’t seem to matter.
Any thoughts or suggestions on resolving the issue? (I could zap PRAM & SMC.)
For anyone else coming across this thread in future, I tried ALL of the fixes that are out there and none worked. It would unlock my Mac mini about one time in a hundred (and startling me in the process). I left it on despite the 99% failure rate because the newer unlock for system preferences did work about 95% of the time. Go figure.
However, one thing I did which has now got the basic unlock working 90% of the time… was to move the Mac. Quite what the problem was that physical location affected OS unlock but not System Preferences unlock I cannot imagine, but that’s what largely sorted it for me.
It could also be the presence of a brand new M1 MacBook Pro on my desk. Maybe the mini knew it had to toe the line more.
The instructions in the link from @RDK have restored this functionality for me, twice.
I wish I had seen that post the first time I experienced this issue (long time ago); I was kind of afraid to perform those steps when I discovered them first, but it worked out fine!