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Does Gmail block IMAP due to less secure app policy?

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'Less secure apps' setting is still available for custom domains (Google Workspace or Google Cloud Identity):
https://myaccount.google.com/lesssecureapps
'Less secure apps' setting allows usage of username/main-password credentials.

Alternatively you can use OAuth 2.0 -or- App Passwords:

OAuth 2.0
There are several flows depending on your scenario:

Web app:
https://www.limilabs.com/blog/oauth2-gmail-imap-web-applications

Installed/desktop app:
https://www.limilabs.com/blog/oauth2-gmail-imap-installed-applications

Service account/daemon:
https://www.limilabs.com/blog/oauth2-gmail-imap-service-account

-or-

A simpler solution is to use App passwords:
Turn on 2-Step Verification for the account (required),
then create an application specific password.

You can find more details on App Passwords here:
https://www.limilabs.com/blog/using-app-passwords-with-gmail

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